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Is It Time to Adjust Your Tax Withholding?

May 18, 2016 by Reynolds & Rowella Leave a Comment

Whithholding tax WHT concept  written in a notebook on a wooden table.

Did you receive a big tax refund or owe the IRS a lot of money for 2015? Then it’s time to update the form that tells your employer how to calculate your federal income tax withholding. That’s Form W-4, Employee’s Withholding Allowance Certificate, and here’s what you need to know.

Filing a new Form W-4 with your employer allows you to adjust your income tax withholding to avoid overpaying or underpaying tax for 2016. The form comes with a worksheet to figure out how many allowances you should claim. These allowances are similar to dependency exemptions on your income tax return. However, the total allowances on your W-4 don’t have to agree with the exemptions you claim on your return. For example, say you’re single and you want to have the maximum amount withheld from your paycheck. You can claim zero allowances on Form W-4. You’ll still claim your personal exemption on the federal income tax return you file next April.

One caution: You should not claim more exemptions than you’re entitled to on Form W-4. Updating Form W-4 can help adjust your withholding to match the tax you expect to owe.

If you need assistance adjusting your withholding, contact us at consulting@reynoldsrowella.com

Filed Under: Estimated Tax Payments Tagged With: Accounting Services Fairfield County CT, Best Accounting Firms Fairfield County CT, Tax Returns Fairfield County CT, Tax Withholding

Estimated Tax Payments

May 11, 2016 by Reynolds & Rowella Leave a Comment

Tax-Estimates

Estimated Tax Payments: What You Need to Know

If you’re required to make quarterly estimated tax payments this year, the first one is due on the same day as your federal income tax return. Failing to pay estimates, or not paying enough, may lead to penalties. Here’s what to consider.

Do you need to make estimates?

If you operate your own business, or receive alimony, investment, or other income that’s not subject to withholding, you may have to pay the tax due in installments. Each estimated tax installment is a partial prepayment of the total amount you expect to owe for 2016. You make the payment yourself, typically four times a year.

How much do you need to pay?

To avoid penalties, your estimated payments must equal 90% of your 2016 tax or 100% of the tax on your 2015 return (110% if your adjusted gross income was over $150,000).

There are exceptions to the general rule. For instance, say you anticipate the balance due on your 2016 federal individual income tax return will be less than $1,000 after subtracting withholding and credits. In this case, you can skip the estimated payments and remit the final balance with your return next April.

Contact us at consulting@reynoldsrowella.com for more information about estimated tax payments.

Filed Under: Estimated Tax Payments Tagged With: Accounting Services Fairfield County CT, Best Accounting Firms Fairfield County CT, Estimated Tax Payments, How to Prepare for Tax estimates

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