Tax filing season is here! While the majority of Americans will get a tax refund from the Internal Revenue Service, there are many taxpayers who owe. If you find that you fall within this category, or if you received a large refund and want access to that money throughout the year, you may want to review your W-4.
There are two adjustments that you can make to reduce or increase the amount of taxes withheld from your paycheck.
- Additional Withholding – This withholds an additional flat dollar amount from your check every pay period. If you owe taxes, an easy way to avoid or minimize the amount that you owe for the next tax filing season is to take the amount owed for 2012 and divide it by the number of paychecks remaining for tax tear 2013, then request to have that figure withheld as an additional amount from each paycheck.
- Allowances – You can adjust allowances using the worksheet on the W-4 form to increase or decrease the amount of taxes withheld from each paycheck. If you find your refund is higher than expected and would like to lower it for the next tax filing season (increasing your take home pay in each pay check), you should adjust your allowances. Paycheckcity.com offers a free web-based pay check calculator that is very helpful in determining how many allowances to claim.
Don’t forget to change both your state and federal withholding if necessary. You can change your W-4 as many times throughout the year as needed.