The W-4 is an IRS form you complete in order to let your employer know how much money to withhold from your paycheck for federal taxes. Accurately completing your W-4 can ensure you do not owe a large amount come tax time and can help prevent you from overpaying, giving you more money throughout the year.
The key to paying the right amount of tax is to update your W-4 regularly. Do this whenever you have a major personal or financial change. Your goal should be to reduce the potential for both owing taxes and receiving a tax refund to zero. But if you count on a big tax refund every year, you should also pay attention to your withholding, because how much you have withheld directly impacts your refund.
Personal and Financial Changes That Affect Your W-4 Withholdings
Some personal and financial changes result in more taxes, while others allow you to claim credits and deductions. Below are changes that affect your W-4 withholdings:
How to Adjust Your W-4 Withholdings
It is easy to adjust your withholding. You can adjust your W-4 at any time during the year. Just remember, adjustments made later in the year will have less impact on your taxes for that year. Use IRS Withholding Calculator to see if you should complete a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. This simple tool makes determining your allowances easy.
By answering a few questions the withholding amount is computed for you. If the result is different from your current withholding, ask your employer for a new W-4. You can claim as many allowances as warranted by your personal situation. Another way to increase your withholdings is to put the actual amount you want deducted on Line 6 (“Additional Withholdings”) of the W-4.