1. Look at your withholding
Are you forced to deal with a quite big tax bill because you didn’t have enough dollars withheld from your paycheck? If the answer is yes then you shouldn’t worry about it. You may be able to avoid that.
You can easily use the IRS’s Tax Withholding Estimator in order to find out if you should (or shouldn’t) file a new Form W-4 with your current employer. Maximize the amount of taxes that are withheld from your monthly paycheck by the end of this year if that’s the case.
A copy of your last year’s tax return and a recent pay stub is all you need to determine your 2020 income. If you owe some extra dollars, the IRS will immediately spot, asking you to write down the ‘extra withholding’ on Line 4(c) of Form W-4.
After doing so, make sure you’ll complete another W-4 for withholding at the beginning of 2021. As a general rule, if the amount of money you owe is actually less than $1,000 after removing withholdings, as well as credits, you’ll not face penalties.
