Mid-Year Tax Check-In
Now that we’re halfway through the year, it’s a great time to pause and review your tax situation. While performing a mid-year tax check-in may not be on your summer bucket list, it can make a big difference when tax season rolls around, including:
Avoiding surprises and possible penalties
Maximizing savings and reducing your overall tax burden
Minimizing stress
To help you stay on track, here are a few things to add to your checklist to set yourself up:
Review Your Tax Situation
Start by taking a step back and evaluating how your life has changed since the beginning of the year. While taxes might not be at the top of your mind during major life transitions, those changes often impact your tax situation.
Here are some common life changes that can affect your taxes:
Changes in employment or income
Getting married or divorced
Having or adopting a child
Relocating to a different county or state
Buying or selling a home
Entering retirement
Starting or changing health insurance coverage
Keeping these in mind as you work through the rest of this blog post will help you identify what areas of your tax situation may need extra attention.
Check Your Withholding
If you have taxes withheld from your paycheck, now is a great time to confirm if the correct amount is being taken out. With half the year behind you, you can better estimate your total income and avoid overpaying or underpaying. It also gives you plenty of time to adjust before tax time.
You may need to update your withholding if:
Your filing status has changed
You have a change in dependents
You have additional income outside your regular job
The IRS Tax Withholding Estimator is a great way to determine if the amount you are having withheld is accurate. If you need to update your withholding, you should submit a new Form W-4 to your employer
Review Estimated Tax Payments
You may need to make estimated tax payments throughout the year if you earn income that doesn’t have taxes automatically withheld, such as self-employment income, freelance work, and investment income. These payments help you stay current with your tax obligations and avoid underpayment penalties when you file your return.
By mid-year, you should have already made payments for Q1 and Q2, making this an ideal time to review your income and evaluate whether those payments were sufficient. If your income has increased or changed significantly since the beginning of the year, you may need to adjust your estimates for the remaining quarters. Taking time now to assess your situation allows you to plan accordingly for Q3 and Q4, helping to avoid surprises and stay on track financially.
Report Changes for the Premium Tax Credit
If you have health insurance through the Marketplace and that is lowered due to the Premium Tax Credit, it's essential to report changes that may affect your credit amount.
Update your application if you have a change in:
Income
Family size (marriage, divorce, or dependents)
Health insurance coverage or eligibility
This is where we see a lot of tax surprises at the end of the year. Life changes that aren’t updated on your application can result in a large repayment during tax time.
Review Retirement Contributions
Contributing to a tax-advantaged retirement plan, such as an Individual Retirement Arrangement (IRA) or 401(k) doesn’t only help you save money for the future, but it can also help you save money at the end of the year by reducing your taxable income.
Mid-year is a great time to review how much you’ve contributed so far and determine whether you can increase your contributions for the remainder of the year. Even small increases can make a meaningful difference in both your retirement savings and your current tax liability.
Collect and Organize Documents
Although most tax documents won’t be available until January, you may already have records related to deductions or credits you plan to claim next tax season.
Organizing your documents now can help ensure you account for all your income and expenses, and save you the headache of digging through receipts at the end of the year.
Common documents to collect and organize include:
Self-employment income and expenses
Medical expenses
Mileage logs for medical or business-related travel
Receipts for charitable donations
Tuition payments and other education-related expenses
If you’re juggling multiple income sources or categories of expenses, consider using a spreadsheet or bookkeeping software like QuickBooks to stay on top of it through the rest of the year. Your future self (and your tax preparer) will thank you for it!
Meet with a Tax Professional
While it’s easy to put off thinking about taxes until the end of the year, meeting with a tax professional mid-year can be one of the most effective ways to stay ahead.
At Northside Tax Service, we offer personalized tax planning services designed to help you avoid surprises, reduce your tax liability, and feel confident about your tax situation.
Whether you’ve experienced a major life change, started earning additional income, or simply want to take a more proactive approach to your finances, we’re here to help. Our team can assist you with:
Reviewing your current tax situation
Identifying opportunities to maximize deductions and credits
Estimating tax payments and avoiding underpayment penalties
Developing strategies to lower your overall tax burden
We’re open year-round and ready to help you plan for the future and achieve your financial goals. Give us a call at (360) 922-0235 to schedule a tax planning consultation.
