Retirees Take Note
Recently the IRS has been sending out repeated warnings to update people that they may need to review their withholding taxes at work to make sure they are paying the correct amount on their federal income tax. Retirees especially need to be keeping tabs because they will need to be keeping the correct amount of withholding from their pension or annuities. Failure to withhold the correct amount can result in a large tax bill in the spring.
One of the big issues for retirees is when they were working, the retirees would automatically pay their withholding with each paycheck. Now after they have retired they will have to pay it four times a year with estimated amounts. Here are some tips to make sure you avoid the tax bills in the spring.
Use the new withholding tables from the IRS to correctly estimate your withholding tax. Figuring your correct estimate may take time, too little and you’ll owe in the spring, too much and you’ll get a massive refund. Better to overestimate than underestimate though.
For social security consider using a Form W-4V which will withhold a flat rate from each check, instead of requiring separate filings.
Obvious, but true, AVOID ERRORS, double checking your estimates and amount owed can save you time and money in the long run.
No one likes doing taxes, but we have to do them every year. Make sure you take the necessary time to do them correctly, and if you have questions contact us at the Center for Financial, Legal & Tax, Inc. for help.