Tax season is just around the corner – now is a good time to start doubling down and check everything in your account is correct so there is less chance of any hiccups when filing.
Start With Your Income Statements
The best tools are your current pay and pension statements. If applicable, your annual Social Security letter. The most important step now is to set up or log in to your employee, pension, Social Security account (if applicable), investments, and checking and saving accounts. Once logged in, ensure your mailing and email addresses are current. Logging into these accounts provides an easy stop for your tax information as you can print or download your recent year-end tax statements to tax programs such as TurboTax and tax cut, etc., or give that information to your tax planner/CPA.
Changing Federal Tax Withholdings
Now is also a good time to check and adjust your tax withholdings, if needed. For example, changes in income due to a raise, retirement, or death suggest you may want to evaluate what’s being withheld or what you’re sending in quarterly.
- Using the IRS tax withholding estimator– the IRS has an online tax withholding estimate to help you determine how much tax you need to have withheld. The calculator helps us estimate if the correct amount is withheld from income/wages, pensions, and Social Security payments to cover our tax liability at the end of the year. The estimate uses a simple, six-step question–and–answer format using the information on marital status, dependents, income (all sources), withholdings, adjustments, tax deductions itemized, and credits.
– The IRS tax estimate can be found at HTTP://www.IRS.gov/individuals/tax-withholdings-estimator.
- A secondary and simpler method to estimate withholdings from one’s pay, or quarterly estimates, is to take taxes owed in 2022, shown on IRS Schedule 1040 line 24. Then divide that number by even 12 if you withhold from your paycheck monthly or by four if paid quarterly – adjust for any changes in income due to raises, retirement, or death.
- 1/3 method, and maybe the simplest is to ask your tax preparer/CPA.
If warranted, it is generally easy to change the number of withholdings and/or the amount for federal taxes on employers or pension websites. If you have trouble, contact their human resource department to help.
State Tax Withholdings – Don’t forget to check your state-estimated withholdings, too.
TAX FORMS
Generally, most employer and investment company tax forms are issued about the end of February or mid-March (such as W-2s, 1099-R’s, 1099-B, 1099- DIV, 1099-I, etc.)
Important Information
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
COVA Wealth Group and LPL Financial do not offer tax advice or services.
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