Did You Get a Surprise After Filing Your Return?

11-17-15 tax-1501475-640x480

Everyone loves to receive a much larger than anticipated tax refund, but what if you unexpectedly had to pay when you filed this year? There could be several reasons why, but it’s not too late to fix it for 2015, including:

Your filing status or dependents may have changed, perhaps from married to single, which usually causes you to pay more income taxes. Maybe you cannot claim your children as dependents anymore. For 2015, each exemption decreased your taxable income by $4,000.

Your business did very well and additional taxes were not paid. If you are self-employed, not only will you owe income taxes on each dollar of earnings, but you may be subject to self-employment tax, which is an additional 15.3%.

Taxable income has increased and certain deductions and credits have been phased-out. Once your income goes beyond certain thresholds, many tax credits, such as the child tax credit and education credits, are reduced. Real estate losses may also become reduced or eliminated as well.

To prevent a negative surprise for 2015’s tax return, check your current withholdings to make sure that enough taxes are being withheld each paycheck. If you need to increase your withholdings, simply print out form w-4 from www.irs.gov or ask your employer and submit it to them with the additional amount you would like withheld. Any amount can be specified, such as $100. If you need help estimating, please contact our office.