End of the Year Tax Checkup Can Help Taxpayers Avoid Surprises in 2025

With autumn quickly approaching, taxpayers may want to consider taking this time, before the holidays officially get under way, to conduct a quick tax checkup. Specifically, taxpayers should think about checking their tax withholding to avoid a surprise tax bill next year, especially if they experienced a significant change, like a new job, another major change in income, marriage, the birth or adoption of a child, or even the purchase of a new home. For help checking your own withholding amount, adjusting that amount, or paying off a tax debt, please reach out to our legal team today.

Most Taxpayers Qualify for Tax Refunds

 The federal tax system operates on a pay-as-you-go basis, which means that taxpayers generally pay taxes on their income as they earn it throughout the year. For most, taxes are withheld from their paychecks directly by their employers. Others, however, including gig economy workers, make quarterly estimated tax payments on their own in order to stay current. Taxpayers who withhold or pay too much during the year will receive a refund after filing their taxes in April. According to the IRS, as many as two-thirds of taxpayers receive refunds annually. Those who underpay, on the other hand, may miss out on the opportunity to receive a refund at all.

Checking Withholding 

All employees should check their tax withholding at least once a year to ensure that their employer is taking the proper amount out of their paycheck to cover employment and Social Security taxes. Those who fail to take this step could end up owing taxes in April because they didn’t take out the proper amount during the year. Certain workers, however, should use extra care when calculating and updating their withholding amounts, including independent contractors and gig economy workers, who, although earning income, aren’t subject to the same withholding rules as contracted employees. Taxpayers who fall under these categories should be sure to check the amount they pay, or how much they have already withheld.

Avoiding Penalties 

Taxpayers who fail to check their withholding could end up underpaying throughout the year and will likely receive an unexpected tax bill, in addition to a financial penalty. How much a person incurs in penalties will vary, but the amount could exceed several hundred dollars. By adjusting withholding on paychecks on a yearly basis or after a major life change, taxpayers can not only avoid underpaying, but can avoid having to pay penalties as well. To change a withholding amount, taxpayers will need to submit a new Form W-4 to their employer or adjust their quarterly estimated tax payments if they are self-employed.

Set Up a One-on-One Consultation Today 

For help using the next few months to align your tax withholding with what you owe, or to otherwise assess your tax situation, please call CPA, former FBI Special Agent, and experienced Florida and nationwide tax return preparation lawyer Ronald Cutler, P.A. today. You can reach our legal team by calling 386-490-9949 or by sending us an online message.

Sources:

 irs.gov/newsroom/irs-encourages-people-to-do-an-end-of-summer-tax-checkup-to-avoid-tax-surprises-next-year

irs.gov/payments/pay-as-you-go-so-you-wont-owe-a-guide-to-withholding-estimated-taxes-and-ways-to-avoid-the-estimated-tax-penalty