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Back to Work? Check your Check!

With so many people in new jobs, working from home, or entering the so-called “gig” economy due to the pandemic and the subsequent economic recovery, it’s time to remind you to make sure your deductions are correct.  

There’s no worse feeling than receiving your W2 in the mail only to find out that your company hasn’t been taking the proper number of deductions out of your check.  

Seriously, we see this happen every year, even in the “good ones” with minimal economic challenges, and I think it’s going to be a BIG challenge this tax season.  Normally, we can expect this type of thing with a teenager who’s just entered the work force, but so many people are working remotely and using direct deposit and simply not reading the paycheck stub they have access to.  

You have to do that.  Period.  

When you get your W2, it’s too late!

So, first things first – check your paycheck stub – in the case of direct deposit, you’ll likely have to log in to an account from your employer or the company that handles the payroll for your company.  From there?  Look at how much is taken out.  

Verify things like state taxes, FICA, FUTA, and even your 401(k) deductions.  There are plenty of online resources to get an accurate estimate of the taxes you should be paying, or you can look to your old tax returns to see roughly how much you paid in over the course of the year.  

From there, you should be able to easily determine if your current amount (and the annualized amount on the paycheck stub) is “close” to where you were in previous years.  

…But what happens if you’re “off”?  Well, for starters, you need to address this with your company right away.  Depending on what your company’s internal processes are, you might need to fill out a new W-4 in paper or digitally, or there may be a twist to that.  

One thing I’d strongly caution against is assuming what you need to claim.  When in doubt?  Reach out to us to go over what the proper “number” is.  Yes, I know that many people like to minimize the number of dependents, as an example, to allow them to have a larger return in the Spring.  While that used to be a good rule of thumb, the tax changes we saw with the new tax paws a few years ago means that isn’t always the best policy now.  

For example, if the value of your home is above certain thresholds in California, it can negatively impact your tax burden.  That can (and has been) a harsh reality for some couples, and the strategy to mitigate your taxes is going to be different.

To put it simply, when in doubt, reach out!

Most importantly, though, right now?  Verify that the correct amounts are being withheld now and we can address the overall strategies to keep more of your money on a call later.  

Don’t be afraid to pick up the phone and reach out!