Microphone (Shure MV7): Hello, everyone.
Welcome to the episode.
This was a little bit of an unplanned episode we're at mid year, and this is a
fantastic point to check in on something.
And I wanted to make sure we didn't miss it.
So consider this episode, your formal reminder.
To take a look at your withholding for the year, or if you're self-employed.
Take a look at your year to date earnings and what you have
sent in for estimated payments.
And see where things stand.
Right?
We are halfway through 2024.
I'm not really sure how that happened, but we've got half a year left to fix things.
If our withholding or the amount of taxes we're planning for
is a little bit off course.
So what made me think of this?
I was working on a return this week.
Where the taxpayers W2.
The amount of withholding.
Was only 4%, 4%.
And I was like, oh no, this is, this is troubling.
Um, the other thing was their W2 was lower by a pretty decent chunk
this year, from the prior year.
And in prior years.
Withholding has been around 14, 15%.
Perfect.
So in talking to the client.
One of the big changes this year and the reason for the reduction in income.
Was that difference was normally from a bonus.
And the company didn't do so well last year.
So they didn't do bonuses.
If you have ever worked somewhere where you may get a bonus.
You'll notice there tends to be more tax withheld from them.
That's incredibly common that's standard practice.
So in these earlier years, when a large chunk of the income was from bonuses.
Then there was extra tax being withheld pretty much.
So everything sort of leveled out.
For this year.
No bonus.
No extra withholdings.
And I'm not sure what changed if there was a change on their w four.
Um, the taxpayer swears, they didn't submit anything new.
But as we know that form changed a couple years ago, I think it was in 2020.
So, if you haven't updated your w four in a while, it might be
worth it to take a look at that.
So they weren't sure what had changed or why the amount would only be 4% and
they hadn't noticed it during the year.
So long story short.
In these earlier years, if it had been quite low in earlier years, it
wouldn't have been noticed really because we have that extra amount held.
But for this year, we were only at 4%.
And so this is the reminder to you.
That you should take a look at your most recent pay stub.
And divide the amount of federal withholding by the amount of
wages and see where you are.
If you are under 10%.
Dig into that a little bit and find out if that seems correct.
The lowest tax brackets, 10%.
And you can end up with an effective rate of less than that.
There might be a reason for it.
There might be some tax planning where maybe you've
made tax payments on your own.
Your spouse is self-employed.
Something like that.
Perfect.
But consider this your reminder to take the most recent pay stub.
And look at that percentage and just see where things are.
If they seem really low, look into it now.
It is always better to find these things and course correct
midway through the year.
Then make it all the way to the end of the year.
Additionally, I know you guys are not going to want to hear this.
Um, but you have to, and I'm sorry, you can, you can blame me,
but maybe you'll thank me later.
If you open a paycheck.
And, you know, something has changed, right?
Maybe your role changed or there's a new payroll processor at your job
or whatever, if anything has changed or even if it didn't, but if you
open a paycheck and do you notice.
At the amount of taxes taken out seems much lower than it was before.
Question that and look into that.
So if there's a sudden change and you didn't request anything to change.
That warrants a little more investigation.
If you haven't looked at the updated w four form.
It used to be, you just picked a number, right.
And you picked a number and the number you picked determined if they held more or
less from your taxes based on exemptions.
Now it has several questions it's designed to be more accurate, but what
it is actually done is created a little bit of a dumpster fire and confused.
A lot of people.
And a lot of people have outdated information on there now.
So take a look at this new form.
It'll ask for things like if you have more than one job, Um, because it's not
uncommon that if someone has more than one job, that they don't withhold tax at
one of the places or between the two of them, they might end up over withholding.
It's going to ask about.
Children, it's going to ask about or dependence.
It's going to ask about additional income.
So, if you haven't updated your w four.
In several years with your job.
Talk to HR.
So this is your reminder.
Look at your pay stub, review it.
See what percentage are withholding is that.
You can even take a look at that compared to last year and see if
you seem like you're on track.
If you're way off course.
If nothing else has changed.
And, you know, last year you received a huge refund.
You might want to have less taken out.
But whatever you do, just take a minute.
And look at that most recent pay stub.
And adjust accordingly.
So.
I hope someone found this helpful.
I hope it was a good reminder to someone out there.
And if you haven't been withholding enough, don't panic.
Uh, you can adjust it.
You can just adjust for the rest of the year and get back on track.
I hope everyone has had a fantastic first half of the year.
And we are on track to have an even better second half.
As always.
I will talk to you guys next week.
I hope everyone has a fantastic weekend.