Chances are you aren’t thinking of your income taxes in August. However, in certain circumstances, you may need to make an adjustment to your tax status mid-year. Most of us want to limit any unexpected surprises at tax time next year. Other times, you might be required to update the IRS to keep certain benefits. Either way, take a look at these four events that could change your tax liability. Don’t wait for tax time to find out from the IRS – such events as these could merit an adjustment as soon as they happen in your life.
1 – Get a new job recently?
This one is straightforward, since your new employer will require you to fill out a W-4 (Employee’s Withholding Allowance Certificate). This form allows your employer to calculate how much federal income tax to withhold from your pay. For help completing this form, you can use the Withholding Calculator from the IRS website.
2 – Self-employed, or have other income?
If you have income that is not subject to withholding, you might need to pay estimated tax. Examples may include interest, dividends, rent, untaxed unemployment, or other income. If you expect to owe a thousand dollars or more in tax and meet other requirements, you will need to make payments, and you can calculate the amount using Form 1040-ES, Estimated Tax for Individuals. Usually, estimated tax is paid four times per year.
3 – Have a baby? Buy a house? Change your marital status? Other life event?
Life events can change the amount of taxes you owe. Be sure to make this change to your W-4 or estimated tax in a timely manner (you can usually change and re-submit your W-4 anytime).
4 – Changes in circumstances for Premium Tax Credit recipients?
If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. If you move out of the area covered by your current Marketplace plan, you need to report this as well. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
For detailed information, see Publication 505, Tax Withholding and Estimated Tax. Follow the link to go to IRS.gov, or call 800-TAX-FORM (800-829-3676) to get it by mail. You can also read the original article here.
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