Your income taxes are probably something you only think about in the late winter or early spring when you file your return. If you are employed and use a W-4, your employer handles the withholding and payment of your taxes from each pay period. It’s important to note that the amount your employer withholds is directly related to the forms you fill out.
When you begin your job, you fill out a packet of both state and federal tax documents. These forms, in turn, help your employer to calculate how much should get paid toward each applicable tax, including Social Security and federal income tax.
In many situations, withholdings will exceed the exact amount of taxes due, which is why so many people in the United States receive tax refunds. That money represents funds that were already paid. Because you paid more than you actually owed, the government refunds the difference. Many people look forward to spending their tax refund each year.
Some people, however, may find themselves in the difficult position of owing taxes at the time of filing, despite having their employer withhold taxes from each pay period. This problem is often related to inaccurate withholding information.
W-4s may need to change after certain life events
When you get married, many times your employer will remind you to update your W-4 to reflect that fact. The same is true when you have a child, particularly if you take time off of work. When you return, your employer’s human resource department will most likely ask you to update your tax forms. The process is simple, and once forms get updated, your employer can immediately adjust the withholding from your paycheck. Any discrepancy should be minor. In both cases of marriage and a new child, generally you would encounter similar or reduced tax liability.
However, in certain difficult situations, your employer may not remind you to make these important changes. Perhaps the unthinkable happened, and one of your dependent children passed away. Maybe you recently divorced and are now subject to withholding at single rates, without receiving deductions for any of your children because you don’t have custody. In both of these situations, failing to adjust your withholding information as soon as possible could result in owing a substantial amount to the state and federal government.
A tax attorney can advise you on best practices
Whether you’re facing a major back tax issue, an audit or need advice on taxes in general, speaking with a tax lawyer is wise. Your attorney can help you make more informed decisions and help you understand your options depending on your situation.