With the recent changes in tax legislation, it is very important that employees reassess their withholding allowances, even if the number has not changed in many years. This is even more important when you have experienced a life change that would alter this number by itself. Your local tax preparation service in Des Moines, IA is here to tell you more about a few of the most common life changes that make the use of a tax withholding calculator necessary:
- Second job: Whether you start working a side gig to earn some extra money or you get another full-time job in addition to your current job, the supplementary income will need to be accounted for. To account for the increased tax liability, a separate W-4 will likely be required.
- Spouse gets a job: Any time there is a change in household income, whether that is higher or lower, there is a chance that the family could find themselves in a new tax bracket. This could subsequently change the number of withholding allowances, which will be determined based on the joint filers’ new combined income.
- Change in marital status: Joint filers’ tax rates are different than those who file as individuals. A change in marital status, be it a new marriage or a divorce, will have a large impact on the way taxes are completed. Filing jointly will increase the type of deductions that can be claimed and will lower the tax rate, while getting a divorce would do the opposite and eliminate some of these tax benefits.
- Unemployment: If you are laid off from a job after the tax year has started, the tax withholding that was based on a full year’s salary will likely no longer fit and will need to be revisited. Similarly, if you rejoin the company before the year is out, you will need to adjust your W-4 again to account for the time that you spent unemployed.
- New child: Having a baby is a joyous experience that will change your family’s lives forever. Once your baby is born, you will be able to claim them as a dependent, which will have a direct impact on your tax allowances. Additionally, you may become eligible for many of the various child tax credits that are available for parents.
Because there are so many different circumstances that could change your tax status from year to year, it is always in your best interests to use a tax withholding calculator to ensure accuracy. Even though many of these calculators are relatively easy to use, understanding your taxes can still be very confusing and overwhelming. For this reason, it is a good idea to seek the assistance of tax professionals to make sure that all of your information is correct.
This is where Accounting & Tax Professionals, PLC comes in. We are a knowledgeable and experienced tax preparation team in Des Moines, IA that will help you have a better understanding of the entire tax process, while working to secure you the maximum refund possible. Give us a call today so we can get started right away.