Three Tax Things to Know About

When you have any form of income that isn’t subject to regular taxation, such as retirement distributions or self-employment pay, the IRS may hold you accountable for making payments to cover any amount of tax you may owe at the end of the year. If you don’t pay the correct amount, (your payment must be at least 90% of the tax owed, come within $1000 for the current year, or 100% of the previous tax year), you may be subject to a penalty.

Taxpayers with greater than $75,000 ($150,000 for married, filing jointly) have a higher standard payment in order to avoid penalty for not paying the right amount. In these cases, estimated tax payments must be at least 90% of the current year, or 110% of the previous year’s liability.

Tax Overpayment

Taxpayers who have more than one job may end up paying more Social Security tax than they have to. Every employer has to withhold 7.65% from your salary (of the first $117,000) for Social Security tax, however you are not required to pay more than the annual limit. If you have income from more than one job, and you end up overpaying Social Security tax, you can get a credit when you file your tax return which will make up for the excess you paid.

You are entitled to claim a personal exemption, even if you file a joint return with your spouse. Each party of the tax return is eligible to claim the exemption for themselves. If you have dependents, you are also able to claim an exemption for those listed on your return. The exemption is worth a reduction of $3,950 of taxable income. Once you reach an AGI threshold of $254,200 ($305,050 for married individuals), the exemption amount is decreased.