Touchdown or fumble?

In football, every play of the game, you must continually review your strategy to make sure that you are in line to reach your goal.  As your position goes up or down, you need to change the play to ensure a safe catch.

The same goes for your tax planning; a good strategy is a must, and dropping the ball can have grave consequences.

Keep in mind that the federal income tax is a pay-as-you-go tax.

Which means you must pay the tax as you earn or receive income during the year.  You want to have enough, but not too much, tax withheld.  The goal is to have your withholding match your actual tax liability, not to have a refund.  However, we all feel better with a small refund than any tax liability on April 15.  Underpayment of your taxes can have serious financial consequences. A W-4 is the form your employer asks you to fill out, so he knows your choice of employee withholding to take out of your check towards your estimated federal and state taxes. The number of allowances a taxpayer takes on their W-4 is unique to their circumstances and should NOT be made with a blind guess.

How often can you change your W-4?

You can change it as often as it is deemed necessary.  It is recommended that you review your W-4 and estimated tax payments on a quarterly basis so that you can stay on track and avoid underpayment penalties. The IRS has given you a new tool to help you with your W-4.  It is a unique “Withholding Calculator” that enables you to do a Paycheck Checkup.  You may access it with this link:  https://www.irs.gov/individuals/irs-withholding-calculator.  You can also refer to the Internal Revenue Publication 505 for additional guidelines on this subject.

Many taxpayers who choose to become new business owners can SIGNIFICANTLY reduce their taxes by deducting appropriate business mileage, business travel, medical expenses, wages for employees (spouse, children), etc. Making these adjustments without proper guidance or taking the advice of a non-professional could result in underpayment of tax liability and IRS penalties.  It is likely that proper evaluation and modification based on the advice of your tax professional, as determined by your current tax situation, could result in an increase of your regular take-home pay if you have been getting a large refund.

If a business owner is making money in his business; after all, income and expenses are weighed at the end of the tax year, he may need to make estimated quarterly payments. Whether or not he has a W-2 job will factor into the equation. 

IT IS CRUCIAL THAT EVERY PERSON CONSULT WITH A QUALIFIED TAX PROFESSIONAL TO DETERMINE WHICH DEDUCTIONS ARE PROPER FOR THEIR PERSONAL CIRCUMSTANCES.

The best professional can make an educated recommendation based on the information you provide him about your tax circumstances. When circumstances change in your life affect your tax situation, have your tax professional reevaluate the deductions so you can make any changes necessary.

As in football, you can avoid penalties by following the rules.   Do not take tax advice from anyone other than a trained tax profession

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