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Withholding Review Required Now- Avoid tax surprises with a simple review

With tax season in the rear view mirror, now is the time to take a hard look at your federal and/or state withholdings to ensure next year’s tax bill does not surprise you.

A review is more important than ever

There are a number of tax code changes that will impact the amount of tax you pay next year. So much so, that if you do not forecast your tax obligation now, you may be in for a very unpleasant surprise. This is true because:

No more advance payments for the Child Tax Credit. The one year requirement of the IRS to pay out half of the Child Tax Credit in advance is no longer in place. So you will not only need to plan for this change, it will also impact your tax return.

Child Tax Credits are lower. In addition, the Child Tax Credit amount for each child is rolling back to the 2020 dollar amount of $2,000. This could mean as much as $1,600 in lower credits for each of your children.

Dependent care credits are lower. The dependent care credit is also lower in 2022. So if both you and your spouse work and have daycare expenses, you will need to forecast the impact of this on this year’s tax obligation.

New 1099-K reporting may require estimated tax payments. The IRS will be receiving millions of new informational tax forms reporting activity from those using digital payment platforms. So for those reselling event tickets, using sites like eBay, Esty and Amazon, you will now need to account for all this income. It may now require quarterly estimated tax payments throughout the year.

Be aware of life events. In addition, a change in your situation could create the need to review your withholdings. It could be due to a job change, selling or buying a home, getting married or divorced, or having a birth or death in the family. Whatever the cause, be aware of the potential change and put a sharp pencil to revising your withholdings.

High inflation is impacting everything. Finally, consider the impact of inflation on your situation. This is especially important if you have a small business as higher costs of labor and supplies could dramatically impact your pending tax bill.

Calculating and making adjustments

Using the IRS calculator. The IRS has an online tool to help you calculate how much you will need to withhold. In order to get an accurate reading, you need to have a copy of your latest paycheck or last quarterly estimated tax filing (Form 1040 ES) and a copy of your last tax return.

The IRS tool is here: IRS Withholding Calculator

Simply follow the tool’s instructions and compare the tool’s recommendation to your current withholdings.

Get expert help if necessary. The IRS recently changed the way it calculates recommended withholdings. While the intent is well intended, many are confused by the change. It is always a good idea to call to review your situation if you have any doubts. But do it now, while there is plenty of time in the year to build the proper withholding amount.

File a new withholding form with your employer. Whether you’re paying too much or too little, you can fix it by filling out a new W-4 form and giving it to your employer. If you’re filing quarterly estimated taxes, you can adjust your next quarter’s estimate in a similar way.

In a perfect tax world, you would not owe too much nor get too large of a refund. Think of overpayments as an interest-free loan the government borrowed from you. Conversely, a shortfall means writing a large check when you file your tax return. That’s a surprise few of us want.

A Tax Nightmare on Your Horizon- MUST READ if using digital payment tools or reselling tickets

A recent tax law change by this edition of Congress now requires transaction reporting to the IRS for anyone receiving more than $600 in payments through digital payment tools like PayPal, Venmo, and CashApp. It also impacts anyone using transaction platforms to buy or sell tickets for sporting events and concerts. Here is what you need to know.

What is happening now

They need your Social Security number. If you use digital payment platforms you will now need to provide your Social Security number and a valid name and address to accept digital payments or to buy and sell tickets online.

The IRS will know. Most of these transactions for those receiving funds will now have this activity reported to the IRS if the total for the year exceeds $600. This is true even if you lose money on the transaction. It will be done using Form 1099-K and will be issued to you in January.

Your taxes may be more complicated. If the IRS considers the transaction a business transaction, you will now need to report the transaction on your 2022 tax return, even for casual transactions that lose money. This is often the case when selling event tickets for a loss or taking digital payments at a garage sale.

You may receive many 1099-Ks. You can expect to receive a separate 1099-K from every platform you use where you exceed the $600 threshold.

The IRS watchdog approach. Prior to 2022, the reporting threshold was $20,000 AND more than 200 transactions. But with the perceived under-reporting of income by those in the gig economy, the transaction threshold was eliminated and the dollar threshold was lowered to $600. Now the IRS will use their computer auditing to compare your 1099-Ks with what you report on your tax return and audit you if they do not match.

What to do now

Coach your friends. Whenever you exchange money with friends in a digital format like Venmo, have them mark the transaction as non-business. Each application will handle this differently, but it is critical you do this to avoid getting a 1099-K in error.

Use cash or check. When receiving payments from friends, if there is potential for error ask for a check or cash. This will avoid the 1099-K reporting mess.

Split payments. When splitting a bill at a restaurant, do not have one person pay and then get reimbursement. Instead, ask the restaurant to split the bill and everyone pay their share. You can make this easy on your server if you are willing to split the bill evenly.

Understand the problem. When receiving a digital payment, you are relying on the person paying you to code the transaction correctly. Unfortunately, you cannot make them do it correctly, so you now need to keep track of digital money received, who it was from, and for what purpose.

True business transactions. For those of you in the gig economy, you have a different problem. Many reporting platforms are inconsistent on reporting. Some will report your income twice, once on a 1099-K and again on another tax form (1099-MISC or 1099-NEC). You must actively monitor this information. Plus, you need to know whether the amount reported are gross proceeds (required) or whether they netted out their fees.

Casual users of seller platforms are now in business. Infrequent users of places like E-Bay, Etsy and Amazon are now in business when payments received are more than $600. Be prepared to create a business tax return on Schedule C of your Form 1040.

This seemingly simple change in the tax code is having a wide-reaching impact. It will further complicate filing taxes AND processing taxes for the IRS. Given the level of public outcry, a roll back of this new rule is possible, but given the nature of Congress, do not plan on it.

Maximizing the Tax Benefit of Charitable Deductions

Charitable contribution deductions are still a great tax savings tool, but they now require more planning. Here are some tips to save the most.

If You're Expecting a Refund, Read This!

If you’re getting a refund, here are four useful tips to know.

1. The average refund is more than $3,500. Through February 18, the IRS reports the average refund is $3,536, which is up 22% versus the same time last year. Since a refund is really your money to begin with, it’s like giving the federal government an interest-free loan.

Tip: If you’re getting a big refund this year due to overpayment of tax, it may be worth adjusting your withholdings to eliminate overpayment for 2022.

2. Most refunds still arrive within three weeks. The IRS says it issues nine of 10 refunds within 21 days. However, electronically filed returns will usually get a refund faster than those filed by paper in the mail. Don’t expect that turnaround with a paper filed return, however. The IRS says they are still processing a backlog of last year’s returns and don’t expect to be caught up until year end.

Tip: The best way to check the status of your refund is by visiting While you can see the status of your refund, there isn’t a whole lot you can do about it until the IRS processes the refund.

3. Sometimes refunds are wrong. If your refund isn’t the amount you expected, there could be multiple reasons why. The primary culprit may be caused by the numerous incentives available during the 2021 tax year, driven by the increased Child Tax Credit. But there could also be a typo or calculation error, or the IRS may have disallowed some deductions or credits. If you owe other debts to the government, they may have these garnished from your refund check.

Tip: If your refund amount is different than the amount on your tax return, try to understand why this is the case before cashing the check. Follow up with the IRS for an explanation about the missing amount. Amounts cashed that are larger than you expect can actually cause problems if the IRS expects repayment.

4. Con artists prey on refund checks. Year after year, IRS scams are among the most commonly reported frauds. Con artists call unsuspecting taxpayers and claim to be from the IRS. They say that you owe money or that a refund was issued in error and demand immediate repayment.

Tip: An IRS agent will never call a taxpayer over the phone without first sending an official letter, and will neither threaten a taxpayer nor demand immediate payment. They’ll also never ask for credit card or debit card numbers over the phone. If you are contacted by a suspected scammer, report it to the IRS by calling 800-366-4484.

It's Tax Time! Estimated Taxes are Due.- Now is the time to file your taxes and make your estimated tax payment.

Reminder: Tax returns AND first quarter estimated taxes are due by Monday, April 18th.

April Fools! You've Been Scammed.- Great tips to identify scams BEFORE they happen

In honor of the traditional day of practical jokes and harmless antics, instead of chasing the hottest new tax scam, why not arm yourself with traits that will help identify even the most recent version of them. Here is what you need to know:

You are a target

While virtually anyone can be a target of scams, thieves usually target those that are most likely to respond. So if you fit into one of these categories, your scam meter should go way up:

  • Elderly. Why: High trust, generally less tech savvy
  • Students. Why: Low income, high debt, and lack of street smarts
  • Immigrants. Why: Easy to threaten residence status, lower understanding of processes
  • Heavy social media users. Why: More willing to give away their identity and to click on things.

Action: If one of these groups describes you, understand you will be subject to a scam…probably every year. If not, then understand who you need to coach for heightened awareness.

Hints to identify scams

While not a sure-fire way to avoid all types of scams, if you follow these hints to identify scams, the likelihood of being a victim lowers dramatically.

  • Personal information is requested via email, web, or phone.
  • The contact comes to you, and not the other way around.
  • Emails ask you to click on something.
  • You are asked to visit a website.
  • Initial contact from the “IRS” is anything other than mail.
  • You feel threatened.
  • Fear is used as a tactic.

Never give them your keys

You would never give your car keys to a complete stranger. So keep that thought in your mind as it relates to your identity, and your money. Drive your own car when it comes to the IRS by controlling the process. You do this by:

  • Understanding. Initial contact with the IRS and their collection agents always uses the mail. So never respond via email or web or phone.
  • Not taking the bait. Any non-mail initial contact is met by hanging up the phone or deleting the email. And NEVER click on any links in an email or go to a website directed by a stranger.
  • Independent confirmation. Never respond directly unless a trusted expert handles the correspondence for you. In addition, ask any IRS agent for their pocket commission and HSPD-12 card. Then go to, get the appropriate phone number and call them for confirmation that the person or form is legitimate.
  • Ignore, non-mail, non-federal. Scammers know it is harder to scam with an IRS ID, so they will claim to be from the state, local law enforcement, Social Security and even the Taxpayer Advocate Service. IN ALL CASES, either ignore or hang up the phone. Then independently look up the number of the agency and call them directly to confirm the validity of the claim. If they say they are legit, ask for mail confirmation, but DO NOT give them your address, they should already have it.
  • Payment only goes one place. Finally, all IRS payments are made out to the US Treasury and sent via approved addresses or direct deposit. This can be found on There are no exceptions to this. So do not give credit card information, buy gift cards, send a check to anyone other than approved addresses, or pay anyone other than the US Treasury.

Remember, your best defense is a good offense, so call immediately if you need help. And now you really can have a happy April Fools Day!

Yikes! It's that Bad?- The 1040 tax instruction publication lays it all out

As taxpayers, it makes sense to understand how our government spends our money. Here are the most recent inflows and outflows as reported by the IRS in this year’s 1040 instruction booklet.

Why is the IRS Sending Me This?!?- IRS turns off some notices

In a recent announcement, the IRS is telling taxpayers it’s turning off some of its automated notices. Here is what you need to know.


With the pandemic, incredibly late tax law changes from Congress, the congressional imposition on the IRS to send out three rounds of stimulus checks, and the requirement to create a new, automatic payment system of child tax credits has created a huge backlog at the IRS. In fact, there are over 6 million tax returns from last year that have still not been processed.

In the meantime, there are automated notices that go out to taxpayers that have not filed tax returns or corrected errors as deemed by IRS audit programming. To make matters worse, payments are being processed without an underlying tax return and the IRS is telling you they will return the money if you do not file your return. Penalties are imposed, there are demands for payment, even repeated notices to fix errors that have been fixed months ago!

Current situation

The IRS is now acknowledging the angst and hardship these notices are causing, at least for some taxpayers. So effective immediately, the IRS is turning off the following notices:

  • Unfiled Tax Return
  • Return Delinquency Notice
  • Balance Due Notices
  • Withholding Compliance Letter

Source: IR 2022-31

What you should know

Don’t fret. IRS notices almost always raise your blood pressure. So open the notice and ask for help.

If you receive a notice, reply to it. While the IRS says it is not necessary to reply, you should probably still do so. Your reply must be timely AND be sent with confirmation of date sent. You can use certified mail or express mail service with tracking information. You don’t want to get caught up in the IRS machine while they try to sort it out.

Compliance is required. While the IRS is turning off many notices, the penalties and interest will still accrue if you have not filed your tax return or owe tax. So file your tax return and pay the tax as it is still required.

E-file helps. While some forms must still be processed via mail, most individual tax returns can be sent via e-file. Continue to file your return digitally whenever possible. Unfortunately, handling these correspondence audits often requires a written response.

It is temporary. The IRS will turn these notices back on after the backlog of tax returns is brought under control.

Sanity will hopefully return and all future tax law changes will be made before the next tax year starts. Just don’t hold your breath and be quick to ask for help if you need it.

Common Tax Increase Surprises- I did not owe that last year!

Picture this: For the past few years you’ve received your tax return and have had a small but nice refund. Now imagine your surprise, when this year, you are required to send in a fairly big check to settle your tax bill. Believe it or not, this message is almost as hard to deliver to you as it is to hear it. Here are some situations to watch for that can increase your tax liability:

New tax laws. The multiple bills passed to pay out assistance from government programs must now be accounted for on this year’s tax return. While the goal of the legislation is to reduce taxes, there are several changes that could cause you to pay more taxes, including:

  • Repayment of excess economic stimulus checks.
  • New taxability of unemployment benefits.
  • Accounting for any small business loan and grant benefits.
  • The need to take required minimum distributions once again in 2021.

A child is no longer eligible. This year’s child tax credit is a big increase versus prior years. But if you already received the money through the advance child tax credit payment system, it will impact your refund this year. And as children get older they grow out of lots of things — clothes, interests and tax credits. Here are some age requirements for popular tax benefits:

  • Child and Dependent Care Credit: under age 13
  • Child Tax Credit: over age 17
  • Earned Income Tax Credit: under age 19 (24 if a qualified student)

Earnings with Social Security benefits. If you are recently retired, start collecting Social Security Benefits, and then begin working part-time, you are also in for a tax surprise. These extra earnings could not only make your Social Security benefits taxable, it could result in a reduction of benefits received.

Other life events. Other life events could provide a tax surprise for you. While some may have positive tax consequences, like a new birth, or becoming the head of household, others might surprise you and result in additional tax. Other common life events include retirement, death and entering/leaving school.

Capital gains surprises from mutual funds. Often sales of investments are a planned event. Unfortunately, many mutual funds sell assets and then you receive a capital gain statement with a surprise taxable event.

Want to avoid these surprises? Spend some time now reviewing your anticipated tax situation for 2021. By doing so, perhaps a planned pleasant surprise can be in store for you.

A Time to Organize- Diverse tax reporting makes this year a challenge

If your tax records are a bit of a mess, here are some ideas to help to get better organized.