Now that we’re in the last quarter of the 2021 tax year, the IRS and companies such as Optima Tax Relief are reminding taxpayers to check their withholding.
Withholding is the money set aside for taxes that you can opt in or out of in your tax forms. When financial situations change, adjustments to withholding are common. The IRS has a tax withholding estimator tool that often shows taxpayers they’re not withholding enough to avoid payments at the end of the tax year. You can also estimate your tax payments to avoid a tax bill next year.
When to adjust withholding
Certain circumstances can considerably change what you owe or how much you will receive when you file.
- Marriage and/or childbirth
- Transitioning into contract work
- COVID relief
- Natural disasters
- Job loss
Paying throughout the year
Withholding from your salary throughout the year can keep you current and in compliance with the IRS. If you file Form 1099, you should pay taxes quarterly to avoid owing a large sum when you file.
Some taxpayers withhold additional funds, sometimes accidentally, which can result in a bigger refund. The IRS reported the average refund amount as $2,700 in 2021.
How to make payments
The IRS has an app, IRS2Go, which allows taxpayers to schedule payments, access their payment plan, or estimate future payments.
By logging into your IRS.gov account, you can also view specific details such as how much you owe and payment history.
Tax Withholding Estimator Tool
Get an estimate today to be prepared for the filing season. With the IRS Tax Withholding Estimator, you won’t have any surprise bills, and can possibly avoid penalties.
You don’t have to be employed to take advantage of the estimator tool. Retirees, self-employed and other individuals may find it useful as well.