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Check Your Tax Withholding and Estimated Payments

If your income is likely to be much higher in 2023 than it was in 2022, you should consider adjusting your Federal income tax withholding from any paychecks and your estimated tax payments to account for the difference. Otherwise, you might have a much larger tax bill than expected and may be exposed to an underpayment penalty.

Note: You will avoid an underpayment penalty for 2023 if your 2023 tax payments (estimated taxes and withholding) are at least equal to your 2022 tax liability [110% of that amount if your 2022 AGI is more than $150,000 ($75,000 if you file MFS)] or, if less than 90% of your 2023 tax.

Taxes that are withheld from wages are considered paid ratably over the year. So, if it turns out you had unexpected income or gains early this year, you can increase your withholding for the rest of the year to reduce or eliminate your underpayment from earlier quarters. Making an estimated tax payment reduces the underpayment from the time the payment is made. The IRS’s “Tax Withholding Estimator,” available at can be used to see if you need to adjust your withholding. Keep in mind that the calculator isn’t perfect. If you want more precise results, please let us know. We can project your 2023 tax and make sure your withholding and estimated payments will be at least enough to eliminate (to the extent possible) an underpayment penalty. We can also let you know what your remaining 2023 tax bill next April will look like.

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