Chances are you aren’t thinking of your income taxes in July. However, in certain circumstances, you may need to make an adjustment to your tax status mid-year. Take a look at these events that could change your tax liability. Don’t wait for tax time to find out from the IRS – such events as these could merit an adjustment as soon as they happen in your life.
- Self-employed, or have other income?
If you have income that is not subject to withholding, you might need to pay estimated tax. Examples may include interest, dividends, rent, untaxed unemployment, or income from your business. If you expect to owe a thousand dollars or more in tax and meet other requirements, you will need to make payments, and you can calculate the amount using Form 1040-ES, Estimated Tax for Individuals. Usually, estimated tax is paid four times per year. - Have a baby? Buy a house? Change your marital status? Other life event?
Life events can change the amount of taxes you owe. Be sure to make this change to your W-4 or estimated tax in a timely manner (you can usually change and re-submit your W-4 anytime). Changes can include marriage/divorce, gain or lose a dependent, or a change in residence. - Changes in circumstances for Premium Tax Credit recipients?
If you receive advance payment of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. If you move out of the area covered by your current Marketplace plan, you need to report this as well. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
For detailed information, see Publication 505, Tax Withholding and Estimated Tax. Follow the link to go to IRS.gov, or call 800-TAX-FORM (800-829-3676) to get it by mail.
If you have questions regarding your situation, I recommend talking with your CPA to see what adjustments should be made to avoid tax surprises.