Empowering Healthy Business Podcast Episode 36 : Tax To-Dos After April 15th: What Smart Business Owners Do Next

Think tax season ends on April 15th? Think again. In this insightful episode, Cal sits down with tax expert Greg Reed to delve into the critical importance of addressing payroll taxes withholding errors even after the traditional tax deadline.

As your business income fluctuates, whether due to increased profits, significant life events like marriage or divorce, or changes in employment status, your W-2 withholding may no longer accurately align with your actual tax liability. Failing to adjust your withholding accordingly can result in payroll tax withholding errors, leading to unexpected tax bills, potential penalties, or overpayments. To prevent these issues, it’s crucial to regularly review and update your withholding information, especially after major financial or personal changes. Utilizing tools like the IRS Tax Withholding Estimator can help ensure your withholding remains accurate and reflective of your current situation.

Greg emphasizes the necessity of reviewing your withholding annually, ideally at the beginning of the year. This practice becomes especially crucial after significant life events, such as marriage, divorce, or income changes. He explores strategies like year-end bonus withholding to mitigate penalties, noting that while effective, these approaches may result in increased payroll taxes.

Additionally, Greg sheds light on the complexities introduced by varying state tax requirements, which often differ from federal regulations. Understanding these differences is essential to prevent payroll taxes withholding errors and ensure compliance.

Main Takeaways of Payroll Taxes Withholding Error

• Withholding Errors: Inaccurate withholding can result in surprise tax bills and associated penalties.
• Life and Business Changes: Events like new business income or marital status changes necessitate updates to your withholding.
• Year-End Bonus Withholding: This strategy can help avoid penalties but may increase payroll taxes.
• State vs. Federal Rules: Understanding the differences between state and federal withholding rules is essential.
• Annual Reviews: Regularly reviewing your withholding helps prevent surprises and ensures financial stability.
• Professional Guidance: Collaborating with your CPA or utilizing IRS tools can simplify the adjustment process.

By proactively managing your payroll tax withholding, you can maintain healthy cash flow and protect your business from costly mistakes. Tune in to gain valuable insights and practical advice on navigating the complexities of payroll taxes.