If you wind up owing the IRS this tax season, consider double-checking your tax withholding at work, said Derus. This way you can avoid owing next year.
After the Tax Cuts and Jobs Act, Treasury and the IRS updated the tax withholding tables, which your employer uses as a guideline to determine how much income tax is withheld from your pay.
Your Form W-4, which you can update at any time, allows you tailor your tax withholding at work.
If you withhold too much in taxes, you’ll get large refund next year, but your paycheck will be smaller.
Withhold less and you’ll get more money in your paycheck now, but you’ll end up with a smaller refund next spring. If you withhold too little, you might owe the IRS.
Another way to curb your tax bill next year is to consider raising your 401(k) plan contribution, Derus said. Your deferrals at work reduce the amount of your wages that are subject to federal income tax.