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Important W-2 Tax Changes For 2012

February 1st

Although the 2011 tax season is not over, it is never too early to start thinking about your W-2 for 2012. Most people never make adjustments to their tax withholding, which can significantly impact how much the tax liability will be at the end of the year. As we begin 2012, it is important to take a look at your withholding and possibly make adjustments to prevent an end of the year tax debt surprise.

Making Changes

Many people adjust their tax withholding only when major life changes arise. Marriage, divorce, and the birth of a child are the most common reasons for adjusting tax withholding. Although these are good changes to make, they aren’t the only reason to make adjustments to a tax bill.

People who are already carrying unpaid taxes may find themselves penalized over the course of the year for not paying their taxes. Increasing the amount of withholding tax will take more out of a person’s paycheck, but it will also ensure their tax liabilities are thoroughly covered at the end of the year. Further, any potential for a refund could then be used to satisfy an owed tax debt.

Self employed individuals also need to monitor their withholding tax closely. Over claiming deductions or decreasing the amount of withholding tax can lead to underpayment, causing problems with their yearend tax bill. Further, certain government programs and benefits require that individuals be caught up on their quarterly tax payment. Failure to pay quarterly taxes could result in IRS penalties if they aren’t claimed properly.




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