Now that the flurry of tax season is over, it is time to take a look forward. While you may have gotten your taxes done with few issues that good fortune may not continue.
In the current political landscape with the potential for tax code to change, it is a good idea to look at some of the common tax issues that crop up. Familiarize yourself with the three examples below so you know when to ask for help.
1. Accidentally claiming the wrong dependent
After a marriage ends in divorce, the final divorce decree usually sets forth how taxes will work, namely who gets to claim what dependent when. It is typical for parents to split tax years they get to claim a child which allows both parents to get tax benefits. What happens if you claim that child in the wrong year? You will have to file an amended return removing that dependent.
2. A large refund
You may see a large refund as a windfall, but it really indicates another matter. You may want to revisit your income withholding to have less tax taken out. While you may believe it is better to overpay than underpay, you may wind up costing yourself and your business (if you own one) series cash flow issues. Use your prior year’s liability as an example of how much to withhold.
3. A large bill
Perhaps you experienced that sinking feeling upon finding out you owe the IRS. With the updates in the tax law, the brackets have changed leading to more people getting pushed into another bracket. Start preparing for next year’s filing season now by pushing your withholdings up. Again, use last year’s liability as a go-by.
Your taxes do not have to cause you stress. Keeping abreast of new tax topics and maintaining a good eye on your personal situation may help avoid the stress next year.