Why Now is the Perfect Time to Check Your Withholding

Now that tax season is behind us, it’s the ideal time to take a fresh look at your withholding for the upcoming year. While it’s easy to put taxes out of mind once you’ve filed, a quick check now can help you avoid surprises next April—and make sure you’re making the most of your paycheck all year long.

Some people think getting a big refund is a good thing, but it often means you’ve been overpaying throughout the year—essentially giving the government an interest-free loan. While it may feel like a bonus, that money could have been in your hands sooner, helping you pay off debt, build savings, or invest. On the flip side, underpaying your taxes during the year can result in an unexpected bill come tax time, which might include penalties or interest if you’re significantly short. Striking the right balance is key: the goal is to have just enough withheld so that you neither owe a large amount nor receive an overly large refund. That way, your money is working for you all year long—improving your cash flow and supporting your financial goals in real time, rather than sitting in limbo with the IRS.

Life changes—like getting married, having a child, or switching jobs—can all impact your withholding. Even without major life events, small adjustments to your income or deductions can shift your tax situation.

At Haefele Flanagan, our tax professionals can help you review your current withholding and make recommendations to keep you on track. We’ll help ensure you’re not paying too much or too little, so you can avoid surprises and better manage your cash flow.

Don’t wait until the end of the year. A small change now can make a big difference later and set yourself up for a smoother tax season next year.

Source: IRS.gov; Business Insider