Important Mid-Year Tax Moves: Why Reviewing Your Withholding During Summer Matters

While many taxpayers are relieved to be finished with last year’s filing season, the IRS says midyear may be one of the best times to review your tax withholding for the current year.

A midyear tax check-in creates an opportunity to revisit retirement contribution goals, evaluate changing income sources, prepare more proactively for year-end financial planning, and adjust withholding throughout the year

Whether you’re a W-2 employee, self-employed business owner, or someone balancing multiple income streams, reviewing withholding now may help reduce surprises later.

What to consider when reviewing withholding

Mid-year can be a great time to review your current retirement savings plan and see if your financial situation has changed or if adjustments need to be made. If you’re saving with a partner, it’s also a good time to review your plans together and make sure you are both aligned.

Steps to take as part of your midyear review can include:

• Scan all income sources, not just W-2 wages
• Check any withholding, especially after any major financial changes
• Consider whether excess refunds could instead support retirement savings goals
• Review your retirement contributions and progress so far, this year
• Check all annual contribution limits before year-end
• If your income fluctuates throughout the year, monitor estimated tax obligations

The IRS also offers a Tax Withholding Estimator tool to help workers and retirees estimate how much tax may need to be withheld from paychecks or other income sources throughout the year.

Life changes that could affect taxes and retirement planning

A mid-year review is also important because there could be unexpected changes in your life that were accounted for in your initial plan. These changes that could affect both your tax withholding and retirement planning include:

• Changing jobs
• Starting a side business
• Moving into self-employment
• Buying property
• Getting married
• Starting a family
• Transitioning into retirement
• Earning additional investment income

Even relatively small income changes throughout the year may impact withholding needs, retirement contribution eligibility, or estimated tax obligations.

Retirement accounts worth revisiting right now

Depending on your situation, reviewing both your withholding and retirement contributions during this time may help you prepare more effectively for the next filing season.

Whether you have a SEP IRA, Solo 401(k), Health Savings Account (HSA), Roth IRA, or Traditional IRA,a midyear review may help you better understand your contribution progress and overall retirement goals.

Reviewing contribution limits, changes in income, and any additional earnings throughout the year may also help you determine whether adjustments are needed before year-end.

Self-employed individuals may want to pay extra attention

If you’re self-employed or a single business owner, you may already understand the challenges that can come up with variable income and estimated tax payments throughout the year.

Balancing business income, taxes, and retirement contributions may become more complex for self-employed individuals, especially for those utilizing retirement accounts such as a Traditional IRA, Roth IRA, SEP IRA, or a Solo 401(k), which may offer higher contribution limits for eligible individuals.

Adjusting now may create more flexibility during tax time

Taking time now to review withholding, estimated taxes, and retirement contributions may help create a more organized approach heading into year-end planning season, while keeping an eye on your annual contribution limits.

You can explore tax-advantaged retirement accounts and contribution opportunities that align with your goals by scheduling a quick call with an IRA Counselor today.

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.