Many taxpayers don’t think about their tax withholding until they receive an unexpected tax bill—or a surprisingly large refund. While either outcome may seem harmless, both can indicate that your tax payments throughout the year aren’t aligned with your actual tax liability.

So how do you know whether you should update your W-4 or adjust your estimated tax payments?

The answer depends on how you earn your income and whether your financial situation has changed during the year.

A W-4 is the form employees complete to tell their employer how much federal income tax should be withheld from each paycheck.

If you receive a W-2 from your employer, your tax withholding is largely controlled through your W-4 elections.

You may want to update your W-4 if:

• You received a raise or promotion
• You started a second job
• Your spouse’s income changed
• You got married or divorced
• You had a child
• You began claiming or losing tax credits
• You owed taxes when filing your last return

Even small changes in income can significantly affect how much tax should be withheld throughout the year.

Estimated tax payments are quarterly payments made directly to the IRS by individuals who don’t have enough tax withheld from their income.

This commonly includes:

• Self-employed individuals
• Real estate agents
• Independent contractors
• Freelancers
• Rental property owners
• Investors with significant taxable income

If taxes aren’t being withheld from your income, estimated tax payments help prevent a large tax bill and potential penalties at year-end.

A mid-year tax review can help identify warning signs before they become expensive surprises.

Consider reviewing your tax situation if:

• You owed more than $1,000 when filing your last tax return
• Your income has increased significantly
• You started a side business
• You sold investments or property
• You receive commission-based income
• You expect a major life change this year

Waiting until tax season often limits your options. Reviewing your withholding or estimated payments now gives you time to make adjustments while they can still impact your outcome.

The answer is simple:

If you’re a W-2 employee, review your W-4.

If you’re self-employed or receive income without withholding, review your estimated tax payments.

Some taxpayers need both. For example, a real estate professional who works a W-2 job while earning commission income may need to adjust withholding and make estimated payments.

The middle of the year provides enough information to project your income while still leaving time to make corrections.

Adjusting your tax payments now can help:

• Reduce year-end tax surprises
• Avoid underpayment penalties
• Improve cash flow planning
• Create more accurate tax projections
• Increase confidence heading into tax season

The goal isn’t necessarily to receive a large refund. The goal is to pay the right amount throughout the year and keep more control over your money.

Whether you’re an employee, business owner, real estate professional, or investor, reviewing your tax payments now can save stress later.

If you’re unsure whether your W-4 or estimated taxes need updating, a mid-year tax planning session can help you identify opportunities and avoid surprises.

At Profit Wise Accounting & Tax, we help individuals and businesses create proactive tax strategies that work year-round—not just during tax season.

Contact us today to schedule a tax planning review and make sure you’re on track before the year ends.