Owing taxes unexpectedly can be very upsetting and difficult financially. It is important think about taxes throughout the year and not just at tax time. Many things can trigger a change to your taxes.
Changes in your personal life can impact your taxes. Getting married or getting divorced can both have a huge impact on your taxes and could be positive or negative depending on the circumstances. Having a baby creates an additional deduction but likewise when your kids become financially independent or too old for you to claim as a dependent your taxes will likely increase.
Employment circumstances can impact your taxes. Changing jobs or getting a raise could also change your taxes and withholdings. If you exercise stock options generally taxes are withheld on your W-2, but it is not always enough to cover the taxes you will owe. If you become unemployed please remember that unemployment compensation is taxable and taxes may not be withheld unless you requested it.
Withholding tables normally change each year. Usually the change is small but in 2018 the change for many was significant. It is important to notice any changes in your withholding and to make sure that enough taxes are being taken out each year.
Retirement is a time for big changes in taxes for most people. Social security can be taxable and generally there are no taxes withheld from your social security unless you request that it is withheld. Your income is normally not the same when you retire as it was when you were working which may change your tax bracket. Make sure the right amount of taxes are being withheld from your retirement income. If there is not enough being withheld you may need to make estimated tax payments.
If you take any early distributions from retirement accounts there are likely penalties to pay and rarely are enough taxes withheld to cover all the taxes on the distribution.
Selling stocks, buying or selling rental property, starting a new business, gambling winnings and any other changes to your circumstances could impact your taxes.
If anything changes in your life, employment or other income occurs that you are concerned may affect your taxes, please call our office so we can help you prepare for any tax consequences.