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This row expands on the withholding shortfall calculation from Question 9. Using the example numbers — tax liability $4,500 and employer withholding $3,600 — the simple subtraction yields a $900 shortfall. That $900 is what the taxpayer would pay at filing, ignoring interest or penalties. The practical lesson is that withholding should approximate your final tax liability as closely as reasonable: underwithholding leads to balances due (and possibly underpayment penalties if sufficiently large and sustained), while overwithholding yields refunds but reduces your available cash during the year. To estimate whether you’ll underpay, compare projected annual tax (based on taxable income and a reasonable tax rate or table) with year-to-date withholding and any estimated payments. If a shortfall appears likely, adjusting W-4 withholding or making estimated payments can reduce the balance due.
If you face a projected shortfall like $900, options to address it include updating your W-4 to increase withholding for the remainder of the year (which spreads the correction across remaining paychecks) or making an estimated tax payment directly to the tax authority. Keep practical considerations in mind: how many pay periods remain, whether the shortfall is a one-time event (e.g., a year with extra freelance income), and whether penalties might apply. Some taxpayers prefer minor overwithholding to avoid surprises; others prefer tax-efficient minimal withholding and to invest the difference during the year. For business owners or contractors who lack employer withholding, disciplined quarterly estimated payments and good recordkeeping are the safest path to avoid shortfalls.
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