Friday, October 22, 2021


Just so you know.

The withholding of federal and state income tax from any source of income is an estimation of anticipated tax liability.  It is not in any way, shape or form a payment in full of the actual total amount of tax due on the applicable source. 

So, having an amount withheld does NOT mean you have paid the tax liability in full on that source of income. 

All taxable income is reported and added up on the Form 1040 (or 1040-SR) and all tax withheld, plus any estimated tax payments made, are added and applied to actual tax liability on the form.  The result will be a balance due or refund.  It is truly extremely rare, based on my 50 tax filing seasons, for a tax return with a tax liability to have either no balance due or no refund – although it has happened once or twice.

To repeat, having tax withheld from a source of income does not mean you have paid all the tax due on that source of income.

I realize this is pretty basic.  But a fellow tax pro in the course of reviewing a tax manuscript I have written told me that he has had several occasions over the years where clients have wrongly believed that they have paid the total tax due via withholding and no additional tax needed to be paid.


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