Why Now Is the Perfect Time to Kick Off Next Year’s Taxes

Why Now Is the Perfect Time to Kick Off Next Year’s Taxes
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(This article originally appeared in the April 2024 issue of Military Officer, a magazine available to all MOAA Premium and Life members. Learn more about the magazine here; learn more about joining MOAA here.)


Each spring, many people breathe a sigh of relief when they finish gathering documents and filing their federal income tax return. But after a brief pause, it’s time to head back to the computer — while your tax return is fresh in your mind, do the following:


Understand Your Return

Many people only take notice of two things on their Form 1040: If they have a refund (line 34) or if they owe tax (line 37). But there’s a bit more to it than that.


If you have a large refund, that means you overpaid your taxes — giving Uncle Sam an interest-free loan — and you should think about withholding less in taxes for next year.


If you owe a lot in taxes, you might be subject to a penalty, and you should consider withholding more in taxes. If you owe too much when you file your return, the IRS will require you to make quarterly tax payments for the next tax year.


[RELATED: MOAA's Military State Report Card and Tax Guide]


Another item to note is your adjusted gross income, or AGI (line 11). This amount helps determine the deductions and credits for which you are eligible.


For example, you might not be eligible to contribute to a Roth individual retirement account (IRA), to deduct contributions to a traditional IRA, or take advantage of education credits if your AGI is too high.


Tax moves that lower your AGI can help mitigate getting an Income-Related Monthly Adjustment Amount added to your Medicare Part B premium.


[RELATED: What Is IRMAA, and What Does It Mean for My Medicare Premium?]


Adjust Withholding

The IRS has a Tax Withholding Estimator that can help you figure out how much tax you want your employer to withhold from your pay. Retirees can also use the calculator to enter pension income or Social Security benefits and then receive an estimate of their projected tax liability and withholding.


If you decide to change your withholding, fill out IRS Form W-4, Employee’s Withholding Certificate, and give it to your employer. To withhold tax on your Social Security benefits, submit IRS Form W-4V to the Social Security Administration; learn more at this link.


Military retirees can submit their W-4 to the Defense Finance and Accounting Service by mail or fax or by using their myPay online account. Annuitants use a W-4P form; get details here.


Retirees who have the Coast Guard Pay & Personnel Center as their pay agency can change their tax information via Direct Access or by emailing their W-4 to ppc-dg-customercare@uscg.mil.


It’s tempting to file away your return and put it out of mind, but taking a few moments to review your tax return submitted this year can prepare you better for next year.


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About the Author

Lila Quintiliani, ChFC®, AFC®
Lila Quintiliani, ChFC®, AFC®

Quintiliani is MOAA's Program Director, Financial and Benefits Education/Counseling. She is a former Army Military Intelligence Officer as well as the spouse of an active-duty servicemember, and worked for over a decade at military installations as a personal financial counselor.