If you owed a lot in taxes this year, now is the perfect time to adjust your withholding so you don’t get stuck with a big tax bill next April. Here’s how you can take action to avoid surprises and potential penalties in 2025:
- Review Your 1040 – Look at your 2024 tax return to see your total tax liability. This is the amount of tax you were responsible for throughout the year.
- Understand What You Owe – Check if you had a balance due when you filed. If so, determine if it’s a one-time issue or if you’ve been consistently underpaying.
- Check for Penalties – If you owed more than $1,000 and didn’t pay enough throughout the year, you might have been hit with an underpayment penalty. That’s a sign your withholding is off.
- Identify the Source of Underwithholding – Look at where your income is coming from:
- Wages: If you’re a W-2 employee, your paycheck withholding may not be enough.
- Self-Employment or Side Income: If you have freelance work, rental income, or investments, you may need to make estimated tax payments.
- Adjust Your W-4 – If you underwithheld from wages, you can update your Form W-4 to have more tax taken out each paycheck. Here’s how:
- Use the IRS Tax Withholding Estimator to determine the right amount.
- On your W-4, update Step 4(c) (“Extra withholding”) to have an additional dollar amount taken from each paycheck.
- Submit the updated W-4 to your employer as soon as possible so the adjustments apply early in the year.
Need help figuring out how much to withhold? Schedule a meeting with a Francis Planner to walk through your tax return, fine-tune your W-4, and set things straight for 2025. Don’t wait—small changes now can mean big savings next tax season!
Did You Know?
Your employer sponsors this financial wellness benefit from Francis LLC. The benefit connects you with down-to-earth financial planners who educate and advise on any money matters…without the sales pitch. We are exclusively engaged by employers like yours and have no investment products to sell, so you can feel confident that you will always receive objective advice.
Your financial planner will help you set priorities and achieve your money goals, without judgment or financial jargon. Know that all discussions are kept strictly confidential. This service is offered as an employee benefit with no per-session co-pays, so you can meet with a financial planner as often as you wish. Services are paid by your retirement plan or your employer.
Connecting with a financial planner is easy! Here’s how:
- Visit FrancisWay.com > Services > Participant Portal
- Call (866) 232-6457
Download the free mobile app (Search for Francis LLC)
