August 1, 2026 | by Leslie Vo, CPA
Are you headed toward an unexpected tax bill or a larger refund than necessary?
The second half of the year is the ideal time to review your tax withholding and estimated tax payments. A few adjustments now can help you avoid tax surprises, reduce the risk of penalties, and improve cash flow before year-end.
A mid-year tax review helps ensure you’re paying the right amount throughout the year, not too much and not too little.
Whether you’re an employee, retiree, investor, or business owner, a mid-year review can help ensure your tax withholding, estimated payments, and tax planning strategies remain aligned with your current financial situation.
Key Takeaways
✅ Avoid unexpected tax bills
✅ Reduce underpayment penalties
✅ Improve monthly cash flow
✅ Adjust withholding before year-end
✅ Keep more money working toward your financial goals
Why Tax Withholding Matters
Your tax withholding and estimated payments are designed to cover your tax liability throughout the year. When they don’t align with your actual income, one of two things can happen: under-withholding or over-withholding.
Under-Withholding: The Costly Surprise
If you haven’t had enough tax withheld from your paychecks or made sufficient estimated tax payments, you could face:
- An unexpected tax bill
- Cash flow challenges when payment is due
- Potential IRS underpayment penalties and interest
- Added stress during tax season
Many taxpayers unknowingly become under-withheld after events such as:
- Receiving a raise or large bonus
- Starting a side business
- Working multiple jobs
- Selling investments
- Taking retirement distributions
- Missing or underestimating quarterly estimated tax payments
- Experiencing changes in household income
Over-Withholding: The Interest-Free Loan to the IRS
While a tax refund may feel rewarding, a large refund often means too much tax was withheld throughout the year.
In effect, you’ve been giving the IRS an interest-free loan with your money.
Imagine having those extra dollars available each month to:
- Build your emergency fund
- Pay down debt
- Invest for retirement
- Fund business growth
- Cover household expenses.
The goal isn’t to receive a large refund or owe a large balance. The goal is accuracy, so more of your money stays working for you throughout the year while helping you avoid unexpected tax bills and potential penalties.
Why Mid-Year Is the Best Time for Tax Planning
Reviewing your tax situation midway through the year gives you several months to adjust payroll withholding or estimated tax payments before December 31. Waiting until tax season often limits your options and turns proactive planning into damage control.
A review can help answer questions such as:
- Are you on track to owe additional tax?
- Are you withholding far more than necessary?
- Have life changes impacted your tax situation?
- Should you adjust your W-4?
- Do you need to make estimated tax payments?
The impact of withholding issues can vary depending on a taxpayer’s circumstances. Here are a few common situations where a mid-year review can help prevent surprises.
Real-World Examples
Example: Capital Gains from Investments
A taxpayer sold appreciated investments during the year and realized a $25,000 capital gain. The taxpayer did not realize the gain could increase overall tax liability and lead to a larger tax bill at filing time.
By reviewing the situation before year-end, the taxpayer was able to adjust withholding and estimated tax payments accordingly, helping avoid an unexpected balance due.
Example: Side Gig Income
A taxpayer earns freelance income in addition to wages and assumes withholding from the primary job is sufficient. During a mid-year review, it becomes clear that the additional income may create tax liability and potential underpayment penalties.
By increasing withholding and making estimated tax payments, the taxpayer stays on track and avoids year-end surprises.
Who Should Consider a Tax Check-In?
You May Benefit from a Mid-Year Tax Review If You:
- Got married or divorced
- Had a child or dependent
- Changed jobs
- Received a raise or large bonus
- Have self-employment or side gig income
- Own rental property
- Sold investments and realized gains
- Made a Roth conversion
- Took retirement distributions
A Proactive Approach to Tax Planning
At SwiftLogic CPA Services, we believe tax planning should be proactive, not reactive. Our role extends beyond preparing tax returns. We help clients make informed decisions throughout the year that improve cash flow, reduce surprises, and support long-term financial goals.
We assist individuals and business owners throughout Washington and Idaho, as well as clients across the United States, with proactive tax planning, tax projections, and withholding reviews.
A mid-year tax review can improve cash flow, reduce the risk of penalties, and identify tax planning strategies that may otherwise be overlooked.
Whether the answer is increasing withholding, reducing withholding, making estimated payments, or implementing additional tax planning strategies, a proactive review can help you finish the year with greater confidence and fewer surprises.
Frequently Asked Questions
How often should I review my tax withholding?
At least once a year and whenever you experience a significant income or life change.
What is a good refund amount?
For many taxpayers, the goal is a small refund or small balance due rather than a large refund.
What happens if I don’t have enough tax withheld?
You may owe additional tax when filing your return and could be subject to underpayment penalties and interest, depending on your circumstances.
How can I avoid an IRS underpayment penalty?
In many cases, taxpayers can avoid IRS underpayment penalties by meeting one of the IRS safe harbor requirements. Depending on your circumstances, this may include paying:
- At least 90% of the current year’s tax liability, or
- 100% of the prior year’s tax liability (110% for higher-income taxpayers).
Because these rules can vary based on income and filing status, a tax professional can help determine the most appropriate strategy for your situation.
When are estimated tax payments required?
Estimated tax payments may be necessary when you receive income not subject to withholding, such as self-employment, rental, or investment income.
Can I change my withholding during the year?
Yes. Employees can update their Form W-4 with their employer at any time.
Take Control of Your Taxes Before Year-End
The months before December 31 provide valuable opportunities to adjust withholding, make estimated tax payments, and implement tax planning strategies.
If you’re unsure whether you’re withholding too much or too little, SwiftLogic CPA Services can help evaluate your situation and recommend adjustments before year-end.
In your consultation, we’ll:
✅ Review your withholding
✅ Estimate your projected year-end tax liability
✅ Identify opportunities to improve cash flow
✅ Discuss potential tax-saving strategies before year-end
Schedule your complimentary 30-minute consultation today and learn whether you’re on track, under-withheld, or over-withheld before year-end.
This article is provided for informational purposes only and should not be considered tax, legal, or financial advice. Tax laws and regulations change frequently, and the application of tax rules depends on your individual circumstances. Consult a qualified tax professional regarding your specific situation.
