The Change You May Need in Your Life – Right Now
Life is all fun and games until you owe Uncle Sam.
And trying to understand why you have a tax debt is often puzzling when you feel like you've been paying your fair share.
Sadly, that may not be the case. but there is hope. I explain why below.
So, you owe money to the IRS. Now what?
Here’s why your tax refund may not be as big as you hoped or, God forbid, you owe taxes this year.
The W4 is what you use to tell your employer how much money to withhold from your paycheck for federal income taxes. In 2020, the IRS overhauled this form to match workers’ actual tax liability more closely. Although this change may seem controversial, it was timely. Some experts note that the tax withholding system had not had a major revision since its inception in 1943, even though the ways we work have certainly changed. With these in mind, it makes 1943 seem like the Age of the Dinosaurs.
Flash Forward to the “New Normal”
Today, more and more of us are working two or more jobs, have a side hustle like Uber or Postmates, sell things online, are “internet famous,” do a little investing on the side using sites like Robinhood and Dodgecoin, or even run a full-time business while still working a full-time job.
Whew, Chile.
Is this you?
You might be thinking, “Nah, that ain’t me,” or nodding your head up and down thinking, “true.” You may not have any formal position at all. You just want to know why your refund is smaller this year, or why you owe taxes.
Wherever you are on this issue: facts are facts.
If you want to stay ahead of the game and have more money in your bank accounts to live worry-free and do the things you love without concerns [.1] about Uncle Sam, you’ll need to know this.
Let’s face it, who thinks about withholding until tax time? We all want a little extra money in our paychecks to spend on holidays or a vacation.
Not many of us think about taxes a year ahead of time, right?
Let's think about your financial goals: vacation, retirement, buying a new home, and retiring the right way.
Even then, the thought of actually doing the work to change the withholding amount is hit or miss, but here’s why you should do it anyway.
Your tax situation can change your tax liability. Below are a few common changes that may impact your refund. Use these to determine when you should consider updating your W4.
· You are earning more or less money this year, compared to the past
· You’ve added a dependent (i.e., gotten married, had a baby, are now taking care of a relative)
· The tax laws have changed
· You’ve sold some stock
· You’ve graduated from college
· You’ve taken out a new mortgage
· You’ve sold a house
· You’ve donated to charity
Being proactive about updating your W4 will help you to match your income to your tax liability. If you start earning more, your tax liability will generally go down. If you earn less, the opposite may occur. If you don’t have any taxes withheld at all, for example, by working as an independent contractor who receives a 1099 from Lyft, then you’ll be responsible not only for your general withholding tax but also for more taxes, such as self-employment taxes.
At Jasmine Rose, we can help you prepare for every stage of life, whether you’re winning at work or transitioning to a new position. The world of taxes can be complex; however, we make it easy through tax planning and resolution. Talk to one of our pros today and take control of one of your most valuable assets: your hard-earned money.
Call 703-229-1711 or email support@jasminerosefinancial.com. We got you.