Should You Have More Taxes Withheld? When And How

While few Americans enjoy paying income taxes, you have good reasons to actually increase how much of your weekly paycheck is withheld for income taxes. When should you do this and how? Here are a few answers.

When Should You Increase Withholding?

The goal of paycheck withholding of taxes is to ensure that your annual tax bill is completely or largely paid before you file your annual tax forms in the spring. Therefore, if you aren't meeting this goal and end up with more income taxes due after filing Form 1040, you should consider having more withheld throughout the year. It can be much less disruptive to take home slightly less regularly rather than have to face an insurmountable tax bill later. 

Adjusting withholding is especially important if you have big changes in your tax situation in a certain year. This could include unusual income sources like the sale of an investment, a profitable side gig, or unemployment benefits. It could also happen if you lose major deductions like the ability to claim dependents. Increasing your withholding is often the easiest way to boost payments to cover additional taxable income. 

Finally, some taxpayers use their withholding as a form of forced savings throughout the year. If you find it difficult to save money on a regular basis, you might consider letting the IRS do it for you. If you deliberately choose to have more withheld than you need to pay your taxes, you will get a refund after filing Form 1040 in the spring. However, you would first need to ensure that your refund will not be seized for things like unpaid child support, tuition, or unemployment reimbursements. 

How Can You Adjust Withholding?

If you find yourself in any of these situations, the good news is that adjusting your withholding is completely voluntary and fairly easy. Ask your employer for a blank Form W-4, Employee's Withholding Certificate. You have the right to file a new form with your employer at any time. 

Although the most current Forms W-4 are designed to withhold only what is necessary, you can tweak your answers to result in more withholding. For instance, you may check the box indicating you're a single filer rather than a married filer and see your withholding increased. Similarly, you may reduce the number of dependents you claim on the form. Keep in mind that this information does not have to match Form 1040. 

Where Should You Start?

Figuring out how much to withhold should be done with the help of an experienced tax service. Failure to adjust it correctly could result in making matters worse when you file your annual taxes. So, start today by meeting with a tax service in your state and learning more about your specific tax situation. 

About Me

The Role Of Business Accountants

My name is Michael Winters and if you own a business and you don't have an accountant, you should read my blog. I didn't realize the importance of an accountant until my sister opened up a small business. She told me that she was going to hire an accountant and I wanted to know why. My sister explained why the duties of an accountant are essential for running a business. She explained that hiring an accountant was necessary for many things including getting a business started, for budgeting and to handle tax audits. After speaking with my sister, I did some research on my own to learn more about this type of job and the duties of accountants. After learning about the important role they play in a business, I wanted to share the information in a blog.

Search

Categories

Archive

Latest Posts

29 January 2021
While few Americans enjoy paying income taxes, you have good reasons to actually increase how much of your weekly paycheck is withheld for income taxe

29 January 2021
As a spouse and parent, you want to provide for your family as best as you can. Along with working in a career that affords you a solid income, you al

3 November 2020
What determines whether a business will sink or thrive is the way you manage its finances. If you want your business to stay afloat, you need to put i