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Review 2015 Taxes to prevent a next April 15th Surprise

posted Aug 23, 2015, 11:12 PM by Zaher Fallahi

Each year, many taxpayers get a larger refund than they anticipated. Some owe more tax than they thought they would because they did not pay attention to their tax situation timely. If you are one such taxpayer, you are advised to review your tax situation to avoid another tax surprise next tax filing time. Did you get married this year? Have a new child? Have a major change in your 2015 income? Some events can have a major effect on your 2015 taxes. The following are key IRS tips (modified based on my experience) to help you come up with a plan of action to prevent an unpleasant surprise:  

 

1-          New Job.   When you start a new job, you must fill out a form W-4, Employee's Withholding Allowance Certificate, and give it to your new employer. Your employer will use this information to determine the amount of federal income tax to withhold from your paycheck. Make sure to fill out the form as accurate as possible to arrive at an accurate number in box 5 of the W-4 form. You may use IRS Withholding Calculator to help you fill out the form. This is a useful tool and it’s available 24/7.

2-           Estimated Tax.  If you earn income that the payer did not withhold any taxes form,  you may need to pay estimated tax. This may include income such as self-employment, interest, dividends, K-1 from a new S corporation or partnership and LLC, or rent income. If you expect to owe a thousand dollars or more in tax, you are advised to pay estimated taxes. You pay it four times a year; April 15, just 15th, September 15th and January 15th, 2016. Use the IRS worksheet in Form 1040-ES, Estimated Tax for Individuals, to determine your required estimated taxes. Alternatively, consult your tax adviser.

3-          Life Events.  Check to see if you need to change your Form W-4 with your existing employer or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home with mortgage, refinancing mortgage, may change the 2015 taxes you may owe.  You can always submit a new Form W–4 to your employer anytime. 

4-          Changes in family and income circumstances.   If you are receiving advance payments of the premium tax credit, it is crucial that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should inform the Marketplace when you move out of the area covered by your current Marketplace. Advance payments of the premium tax credit help you pay for the insurance premium you buy through the Marketplace. Reporting changes will help you get the proper type and amount of financial assistance, which results in avoiding to get too much or too little in advance.

Zaher Fallahi, Tax Attorney, CPA, is an IRS Defense Attorney, and assists taxpayers including Americans Living Abroad and Non-Resident Aliens subject to the US tax law, in resolving their tax controversy regarding their Offshore Voluntary Disclosure Program (OVDP), Report of Foreign Bank and Financial Accounts (FBAR), Foreign Account Tax Compliance Act (FATCA) and Foreign Trust. The firm handles Offer-In-Compromise and Non-Filed tax returns cases.  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), e-mail taxattorney@zfcpa.com

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