Mid-Year Financial Checkup Mini-Series Part 2: Taxes

In part 1 I discussed the importance of reviewing your goals and tracking your progress. That is a great starting point and something you should get into the habit of doing on an even more frequent basis. The next mid-year item that you should check into is in regards to taxes.

Review Withheld Taxes YTD

If you are employed this can be as easy as looking at your latest pay stub and looking at the total amount of federal and state taxes that have been withheld so far this year. This is important because over the past six months you may have had something occur in your life that could put you into a position where you end up over or under withholding. If nothing has changed from last year you can pull out your 2006 return and compare to see how close you are.

Make Changes if Necessary

If something will be happening or has already happened that can change your tax liability this year this is a perfect time to make changes. Maybe you recently bought or sold a house, received capital gains, began saving for retirement or college, or even have a sizable charitable donation. Whatever the case may be it is a good idea to plan for them now so you can avoid a surprise when doing your taxes at the end of the year.

Check Your W-4 Exemptions

I usually recommend that everyone review their exemptions at the beginning of each year but it can be something that is easy to forget. If you didn’t make any adjustments this year you can quickly run through the IRS withholding calculator to determine what you should be filing. As with everything else in this mid-year checkup, it is easier to spot problems and make small changes with six months left as opposed to being surprised when it is too late to make any adjustments.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.