Benjamin Franklin once said “If you fail to plan, you are planning to fail.” This phrase can be applied to various aspects of life, especially when it comes to filing your taxes. Taxpayers who are employed must pay federal income taxes each year. If you don’t pay these taxes, you and “Uncle Sam” probably won’t be the best of friends!
Most employers withhold taxes from the wages of their workers to stay in compliance with Federal Income Tax regulations, which operates on a “pay-as-you-go” system. Each pay period you should see a deduction from your paycheck that will cover these taxes. If not, you may have to pay a lump sum of money back when you file. There are also other sources of income that are usually taxed which include pensions, bonuses, commissions and gambling winnings.
For those that do not have taxes withheld, like self-employed individuals, they generally have to pay what is known as an “estimated tax,” which can be paid off quarterly or in one lump sum during tax filing season. Other income such as capital gains, dividends, interest, rent and royalties are usually required to make estimated tax payments as well.
Also, did you know that major life events could affect your taxes as well?
We’ll talk about how your taxes can be impacted significantly a little later.
Avoid Tax-Time Surprises
Here’s a “heads up” on ways to eliminate any last minute surprises when it’s time to file your taxes:
New Job: New employees must complete a Form W-4 (Employee’s Withholding Allowance Certificate) when starting a new job. This form is used by employers to determine how much federal income to withhold from your regular pay, bonuses, commissions and vacation allowances. The IRS Withholding Calculator is a great tool for taxpayers to use to figure out how much tax to withhold.
- Life Events: Major life events such as a change in marital status, the birth of a child or the purchase of a new home can alter the amount of taxes a taxpayer owes. The IRS actually provides detailed information for various major life events that you can gain more specific information from regarding your taxes.
- See Managing Your Taxes After a Life Event.
By taking these precautionary measures you will be able to keep calm during tax season! If you need some extra time to gather everything you need to file, there’s no need to worry. ExpressExtension is here to provide you with an automatic filing extension of up to 7 months for your business, personal, or exempt organization extension within minutes.
Contact us if you have any questions or need assistance with filing. Our U.S. based customer support team is available Monday – Friday from 9 AM to 6 PM EST at 803.514.5155. We also offer live chat and 24/7 email support at [email protected].