Why the Correct Tax Withholding Amount is Important
You do not want to end up paying the IRS too little or too much at tax time. Filling out your W-4 form can be tricky, but if you adjust your tax withholding correctly, you will be maximizing your efficacy in paying taxes.
People believe ending up with a tax refund after filing taxes is a good situation, like a savings account. But the government is essentially borrowing your money minus interest. There are better ways to have the money deducted without you ever really feeling the difference. One of the methods is to simply have that portion of money deducted from your paycheck automatically and deposited into an interest-bearing savings account or mutual fund. If you believe it won't make a difference, think again. Why do you think you get a large tax reimbursement? It all adds up, that's why.
What you owe in taxes should be only what you need to pay. You have to ensure that your tax withholding is correct by periodically checking your exemptions as they might change within the year. To give you time to make changes, early November is a great time to do this. Make sure you update your tax record and review your tax withholding after you have filed your tax return.
Make sure that you're not under or overpaying taxes to avoid IRS issues. If you're changing your dependents, having a child, or getting divorced or married, review the amounts of your tax withholding.
You can easily steer clear of having to pay the IRS a large amount of money by properly filling out your W-4 worksheet. It is easier than it looks at first if you take the time to accomplish the withholding amount correctly.
Depending on your particular circumstance, it may be beneficial to discuss your withholding levels with a tax preparer. You can always update and change the withholding amount several times each year, even if you've already accomplished the W-4 at your present job. If you lose your job and have to take a lower paying job, or if you happen to get a promotion with a significant increase in pay, you'll want to review your tax withholding amount and ensure that you are on track to only pay what you owe to the IRS. Accomplishing so will avoid a huge IRS issue.
Darrin T. Mish is a veteran tax attorney with over a decade of experience. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With a passion for providing IRS help to taxpayers with both individual and payroll tax problems, his firm only focuses on representing clients in the United States with IRS Problems. He also spends a great deal of time traveling the nation providing training to attorneys, CPAs and Enrolled Agents on how to handle their toughest cases with the IRS. If you would like more information about his practice and how he can help you, please visit http://getirshelp.com.
ABOUT THE AUTHOR: Darrin Mish
Mr. Mish graduated from Golden Gate University, in San Francisco, California in 1993 with a Doctor of Jurisprudence. He was admitted to the Florida Bar in that same year and the Bar of the State of Colorado in 2002.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.