Monday February 6, 2023 – The IRS collects taxes from every paycheck issued. This is called withholding and it’s how most Americans pay their taxes. America is a “Pay as you go” system.
The idea is for employers to withhold an estimated amount of money from each paycheck that reflects what you owe in taxes; when you file your return, the difference between what was withheld and what you actually owe is either refunded to you or requested from you.
The problem is that the amount withheld is based on your income estimates for the year, and with wages increasing, many people are facing a surprise—instead of getting a refund, they owe money come April 18.
The good news is that you can adjust your withholding so it more closely matches what you owe when tax time rolls around. Talk to your payroll department or consult with a tax professional to figure out how to make sure you’re not giving away money in the form of a refund that you would have been better off using in your regular budget. That way, when Tax Day comes around, you’ll be prepared.
Pay attention to the amount withheld from each paycheck and make the necessary adjustments throughout the year to ensure that come tax time, you won’t be in for a shock. When it comes to taxes, knowledge is power. Take the time to understand your individual tax situation and make sure you’re withholding the right amount from each paycheck—so you can keep more of what’s rightfully yours.
After all, there’s no better way to celebrate Tax Day than with a little extra money in your pocket. Happy filing
https://www.thestreet.com/dictionary/w/withholding
Steven A. Leahy is a tax attorney in Illinois. He was the host of the long-running popular Radio Show “The IRS Radio Hour” heard every Sunday evening on AM 560 The Answer. Attorney Leahy is also the author of the book “Deal With Your IRS Problems Today!” You can get a FREE copy of this important book at FreeIRSBook.com. Or Call 24/7 (312)664-6649