Beyond allowances, there are a variety of things that may cause the amount of taxes you owe to shift from year to year. Those may include things such as:
Changes in marital status: As your marital status changes, your filing status may change as well. For instance, if you went through a divorce over the past year and are now filing alone, you may be pushed into a different tax bracket that could increase the amount of taxes that you owe. If you haven’t updated the allowances in your W-4 to reflect these changes, you may be underpaying taxes throughout the year.
A new job: Did you or your spouse take on a new job this year? For a new W-2 job, you may have completed your W-4 differently, which could lead to underpayment of estimated tax liability. If you took on a freelance or contract position and didn’t pay your own estimated quarterly tax, you’ll likely owe a significant amount of taxes at the end of the year. Next year, be sure to pay your estimated taxes each quarter to reduce the damage at the end of the year.
A change in dependents: If you previously claimed the child tax credit and your child has aged out of eligibility, you can no longer claim it on this year’s tax return. Similarly, if a dependent has moved out of your care, you’ll no longer be able to take a deduction or credit for them.
Let’s face it: taxes are confusing, and the way you fill out a form could totally alter your financial situation over the course of a year. If you’re interested in exploring the various ways that you can save money on your taxes, or have questions about the amount you owe, consider exploring tax preparation services from Advance Tax Relief. Our experts can consult on your taxes and help prepare you for the upcoming tax year, so that you’re walking away with the most in your pocket. Contact us today.
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