Hi guys, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com
Can your wage income tax withholding cover your income taxes liability before the end of the year? If not, here are your 3 options:
1. Make estimated tax payments. The only downside is that you might be subject to penalties for underpayment of quarterly estimated taxes – meaning you may owe a penalty when your quarterly estimated tax payments (plus withholding) total less than 25% of your required annual payment.
2. The better option is, you can increase your wage income tax withholding before the end of the year. What is the advantage of doing that? You are not subject to any underpayment penalties because IRS looks at wage income tax withholding as paid equally throughout the year.
3. And lastly, here’s the best option, look if you can either maximize your 401-K deductions, company pre-tax benefits or prepay some expenses that is deductible for this year. That way, your taxes will be reduced and will hopefully result in a tax refund next year.
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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com