Month: September 2024

If you’d like to avoid surprises next year at tax time, consider doing an end-of-summer tax update and make any tax withholding or payment updates that are necessary.

While most people get a refund after filing their taxes, many also find they unexpectedly owe taxes. This is often due to a life or job change for which they did not make the necessary tax adjustment during the year.

Those who should be especially careful are:

• Gig economy workers.
• People with a “side hustle.”
• Anyone earning income not subject to withholding.

If this sounds like you, be sure to check the amount you pay, or the amount you withheld throughout the year, and make adjustments as needed to bring the tax you pay or withhold closer to what you owe.

Here are some important things to keep in mind:

How refunds work

The federal tax system is pay-as-you-go. You should pay tax as you earn wages or receive income during the year. For many, taxes are withheld from their paycheck by their employer and then given over to the IRS on their behalf. Others, such as gig economy workers, should make quarterly estimated tax payments throughout the year to stay current. A refund normally results when too much is withheld or paid throughout the year.

Avoid an unexpected bill

On the other hand, some people end up with estimated tax penalties because they underpay throughout the year. The penalty amount varies but for some it can be several hundred dollars. Adjusting withholding on paychecks or the amount of estimated tax payments can help prevent penalties. This is especially important for self-employed people, including those in the gig economy, those with more than one job, and those with major changes in their life, like a recent marriage or a new child.

With that in mind, we encourage you to take a look at your current withholding and estimated tax payments and make adjustments as necessary to bring them into alignment with the tax you will owe. If you need help doing this, please contact our office. We would be happy to help.

With the new school year upon us, teachers should remember that they may be eligible to deduct up to $300 for classroom expenses in 2024.

This deduction allows educators to offset the cost of supplies, materials and other classroom essentials, providing some financial relief for those who spend their own money to improve their students’ learning experience.

Who qualifies for educator expense deductions?

This deduction is available for teachers, instructors, counselors, principals and aides who work at least 900 hours a school year in a school providing elementary or secondary education. Educators filing jointly can claim up to $600 if both spouses are eligible, but no more than $300 per person. Educators can claim this deduction even if they take the standard deduction, and both public and private school educators qualify.

What’s deductible?

Educators can claim deductions for out-of-pocket expenses on classroom items like books, supplies, equipment (including computers and software) and COVID-19 safety measures such as masks, disinfectants and air purifiers. They may also deduct costs for professional development courses relevant to their teaching.

Expenses for homeschooling or nonathletic supplies for health or physical education are not eligible. The IRS recommends educators maintain detailed records, such as receipts and canceled checks, to substantiate their deductions.