Determining your tax withholding ‘sweet spot’
Posted on August 3, 2017
There is still plenty of time left in the year to change your tax withholding status to avoid having too much — or too little — federal income tax taken from your paychecks.
Why change the amount you are already taking out? Consider what changes may have taken place so far this year:
- Has your marital status changed?
- Was there a salary change for you or your spouse?
- New baby joined your family?
- Did you or your spouse retire or lose a job?
Whether small or significant, life changes like these will have an impact on your tax bottom line. Make sure you request a new “W-4,” Employee’s Withholding Allowance Certificate, from your employer, and change your withholding status or number of allowances as needed.
Taking the time to make these changes now will give you enough time to adjust your withholdings and eliminate a large refund or having to pay additional taxes when you e-file your return.
This is more important than ever now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns will face additional review time next year.
Not sure how to figure out the best withholding amount for you? Ask your CPA at Teipen Selanders Poynter & Ayres for a Withholding Review.
For do-it-yourselfers, the IRS offers several online resources to help you figure out the withholding amount that’s best for you on IRS.gov:
- IRS Withholding Calculator – Online tool helps determine the correct amount of tax to withhold.
- IRS Publication 505 – Tax Withholding and Estimated Tax.
- Tax Withholding – Complete information on withholding, estimated taxes, FAQs, and more.
- Self-employed taxpayers can use a Form 1040-ES worksheet to correctly figure their estimated tax payments.
As the CPAs at Teipen Selanders Poynter & Ayres know, having the right amount taken out each pay period helps keep taxpayers closer to a zero balance when they file their tax return. Finding that balance between no taxes owed or refund due – is your ideal “sweet spot”.