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Looking at your EOY bottom line

Posted on December 18, 2022

“Now’s a good time to take a look at a few financial points of interest before the end of the year,” recommends Teipen CPA Mike Poynter. “Life is full of changes — divorce, new tax laws, new babies, home purchases, new jobs – all perfect reasons to adjust withholding – especially before an expected end-of-the-year bonus.”

Here are a few ways to get a sense of what your tax situation is for the year 2022:

Use the IRS Tax Withholding Estimator
The Tax Withholding Estimator can help you determine if you have too much income tax withheld. It can also help you determine if you should withhold more or make an estimated tax payment to avoid a tax bill when you file your tax return this spring.

This helpful IRS tool offers workers, retirees and self-employed individuals a user-friendly, step-by-step way to effectively tailor the amount of income tax you should have withheld from wages and pension payments based on your complete set of facts and circumstances. It’s very handy.

Pay as you go
Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. That said about 70% of taxpayers withhold too much every year – which of course, typically results in a refund.

What to know about refunds:

  • The average refund in 2022 was just under $3,000.
  • You do not have to get one. Proper withholding adjustments help you boost take home pay rather than be over withheld and get it back as a tax refund. (With expanding inflation, this may be a great way to help!)
  • While most refunds are issued in 21 days or less (from an error-free and paperless tax return), those with mistakes will take longer!
  • The IRS advises against relying on a refund for big purchases.
  • Direct Deposit is the easiest and most convenient way to get a refund. More than 90% of all refunds are issued this way.
  • Paper return processing delays stemming from the pandemic are six months or more.

What else could affect 2022 taxes
Some unforeseen life events can be a trigger to make withholding adjustments. They include:

For more information about estimated taxes and tax withholding, see Tax Withholding at IRS.gov. Or call us at Teipen CPA Group with your specific questions. Happy to help, as always.