It’s that time of year again. Summertime! The time of year when we all enjoy warm weather, vacation, and reviewing our federal tax witholding. Well, maybe we don’t all enjoy reviewing our federal tax witholding, but it’s definitely something that we all should do each year. And summertime is a good time to do it.
You should definitely check your witholding if you fall into any of these group, as adjustments are more likely to be needed:
- People who are working two or more jobs at the same time or who only work for part of the year
- People who claim credits such as the child tax credit
- People with dependents age 17 or older
- People who itemized deductions on prior year returns
- People with large tax refunds or large tax bills for the previous tax year
When you’re reviewing your witholding, a good place to start is the IRS Tax Witholding Estimator, a free tool provided by the IRS. This tool guides you step-by-step through the process of checking your withholding, and provides recommendations on adjustments that might be needed.
Adjusting your withholding
So what types of adjustments might be needed to your federal withholding?
You should generally increase withholding if you hold more than one job at a time or have income from sources not subject to withholding. If you don’t make any changes, you will likely owe additional tax and possibly penalties when filing your tax return.
You should generally decrease your withholding if you qualify for income tax credits or deductions other than the basic standard deduction.
Either way, if you need to adjust your withholding, you will need to submit a new form W-4 to your employer as soon as possible since withholding occurs throughout the year.
If you would like help reviewing your witholding, or if you need advice on what adjustments might be necessary, please contact our office.