Why You Should Time to Fine-Tune Withholding Tax After Filing

Now that tax filing season has finished, we can all breathe a massive sigh of relief. On the other hand, this would be the perfect time to scrutinize your clients’ withholding taxes. Checking to see if the right amount of taxes were withheld from their paycheck is crucial. The cycle would continue the following year if the taxes were computed incorrectly. Many factors will affect how withholding tax is calculated, including the completion of specific life milestones such as getting married or having children. Knowing this, tax preparers should take extra care in analyzing the withholding taxes of their clients to see that everything is in order and ready for the next tax season.

 

Why You Should Time to Fine-Tune Withholding Tax After Filing

The IRS says that the time is now for the scrutiny of withholding taxes should be done. Taxpayers will not be able to do this on their own, which is why it is the job of tax professionals to help their clients with this task. Here are a few FAQs to help you figure out how to handle your clients’ specific situations.

 

When Should the Adjustments Be Made?

Since withholding goes on for the entire year, should a change need to be made, your client needs to submit a new and updated W-4 as soon as possible. As their tax preparer, you must look into any activities your clients had within the past year that may warrant the need for fine-tuning their withholding tax. You will then need to inform your client of what they need to do for the updates to be filed.

 

Who May Need to Increase Their Withholding Taxes?

The IRS says that people who work multiple jobs or receive extra income that is not subject to withholding taxes might need to increase the amount of withholding tax from their paychecks. On the other hand, the agency suggests that a decrease in withholding tax may be necessary if the taxpayer qualifies for any deductions and tax credits beyond just the standard amount.

 

Who Should Check Withholding?

The agency recommends that the withholding taxes of specific categories of taxpayers should be checked. Some examples include if the taxpayer’s spouse is an IRS employee if the taxpayer works two or more jobs at the same time or only work for part of the year, if they have high incomes and more complex tax returns, or if the taxpayer claims credits such as the child tax credit.

 

What About State Income Tax Withholding?

In select scenarios, taxpayers may need to adjust their state tax withholding as well. As their tax preparer, you may need to check with the state department of revenue for more information about this.

 

Conclusion

Using professional tax preparation software can eliminate errors and guesswork. Software like this can significantly help tax preparers in determining if a change in withholding is necessary. The software will make the task easier for tax professionals to determine if a new form W-4 will be needed and what information should be included. To minimize errors on your file reports, using tax pro software like Keystone Tax Solutions is a must. This software for tax preparers will help get rid of the guesswork and estimates that sometimes make the job so stressful. Get the best professional tax software by contacting us today!

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