Tax withholding can be a complicated task. It has been more complex since the new provisions have been made with tax cuts and job acts by TCJA. Therefore, it is more important to make sure that the right tax is held for a particular situation. People with more complicated tax situations can still be secure, as most taxpayers have already adjusted their withholdings. You should be well aware that the longer you may wait, the shorter withholding period you might get to withhold the necessary federal tax. In other words, for each remaining paycheck, more tax is to be paid. In this article, we are going to discuss the top 5 steps for handling unexpected tax bills.
5 Steps for Handling Unexpected Tax Bills
To avoid the taxpayer bill upcoming year, follow these paycheck check-ups:
A Taxpayer Receiving Large Refunds
Those taxpayers who adjust their tax holdings just to receive large funds could be affected while paying tax. This includes tax rates and different brackets as well as doubling of standard deductions. Adjusting tax withholds will help the taxpayers to make adjustments for their particular tax situations. It also helps to avoid the unpleasant tax surprise.
High-income Taxpayers with Complex Return
High-income taxpayers often notice situations like itemizing instead of taking tax deductions as being more beneficial. However, in the case of the passage of tax reforms, it may no longer be true. In some cases, taxpayers may be affected by any of the following cases:
- Changes to tax brackets
- Expansion of the child tax credit
- New limits for deductions on some mortgage interest
Taxpayers with Dependents
In addition to the child tax credit, the TCJA has recently added a new tax credit. It is especially for parents and other relatives with the age of 17 or older. The new tax credit, i.e., the credit for other dependents, is non-refundable. It has a limit of up to $500. This change may also affect family tax situations in 2018. It is important to withdraw the reflected amount to prevent unexpected tax bills.
Taxpayers Working the Sharing Economy
The US tax system goes on a paid basis. Taxes must be paid on income as they are received at the end of the year. People who do not have an employer and are part of the economy need to make sure that they pay their taxes on time rather than withholding. They should pay quarterly tax payments to cover the tax obligations.
Taxpayers Owing Estimated Taxes
More than 10 million taxpayers undergo a tax penalty, as that is a very common situation. Taxes are withheld for most people receiving salaries or wages on a monthly or daily basis. However, taxpayers may need to undergo some changes as the different scenarios by the government are under practice.
A Retiree with Pension and Annuity Incomes
The TCJA has made several changes and has taken the tax-paying system to the next level for the retiree. From the complex system, they have made it simpler. The retiree can submit the form W-4P and make the payments of the withholdings of the year.
