The One Thing You Should Do After Filing Your Taxes
Introduction
After completing the annual task of filing tax returns, most of us like to put the ordeal behind us until the next one rolls around. But do yourself a favor and complete one more step: Review your withholding. Ensuring your withholding is correct can help you avoid a large tax due next year or prevent you from loaning the government money interest-free until you file next year.
Image Description: A person reviewing their withholding forms after filing taxes.
How to Review Your Withholding
According to a December 2018 H&R Block survey, only 19% of respondents had updated their paycheck withholding after the Tax Cut and Jobs Act of 2017 took effect. Updating withholdings is done via a W-4 form. The form requires providing much of the same information you put on a tax return, such as filing status, income, itemized deductions, and eligibility for child- and dependent-related tax credits. All of this information helps determine the number of allowances you should claim and how much tax is withheld.
Image Description: Infographic explaining how to review and update withholding using a W-4 form.
Steps to Update Your Withholding
- Contact Your HR or Payroll Department: To confirm your current withholding or to obtain a new W-4 form.
- Use the IRS Tax Withholding Calculator: The calculator can estimate your future tax liability and the number of exemptions that should be included on the IRS Form W-4.
- Check Your Pay Stub: Review the amount of taxes paid year-to-date and ensure it aligns with your expectations.
- Revisit Withholding After Major Life Changes: If you receive a raise, get married, or have a baby, you should check your withholding again.
Image Description: A person updating their W-4 form with their HR department.
Benefits of Proper Withholding
Proper withholding ensures you don’t have a large tax bill at the end of the year. It can also prevent overpaying taxes and giving the government an interest-free loan. By adjusting your withholding accurately, you can better manage your finances throughout the year and avoid surprises during tax season.
Image Description: A chart showing the benefits of proper withholding for financial management.
Conclusion
Reviewing and updating your withholding after filing your taxes is a crucial step to manage your financial health effectively. By ensuring your withholding aligns with your tax liability, you can avoid large tax bills or refunds and better manage your cash flow throughout the year.
Image Description: A person feeling relieved and confident after reviewing their tax withholding.
