Are You in Need of a W-4 Change?
By Stephanie Breedlove, Breedlove & Associates
Did you get refund this year from the IRS? If you answered “no,” you’ll want to read the rest of this carefully because we can help turn that into a “yes” next year. And even if you answered “yes,” many people want to keep their refunds as small as possible so they can use that money throughout the year. The key to achieving your desired income tax refund lies with how you fill out your Form W-4.
When you look at your paystub, the withholding deductions you see for federal and state income taxes reflect the allowances you’ve declared on your W-4. Throughout the year, these withholdings are paid to the IRS and state agencies and at the end of the year the IRS calculates whether you paid too much in taxes or too little. (Note: the W-4 is not precise estimate of tax liability, so everyone will have some level of refund or payment).
But if you want to manipulate your refund/payment, you can do so anytime you want. All you have to do is fill out a new Form W-4 and change the number of allowances. Each allowance will change your refund/payment by about $500-$700 over the course of the year.
Let’s say, for example, you owed the IRS $200 this year and don’t want to owe money next year. You should decrease the number of allowances on your W-4 (i.e. from 2 allowances to 1 allowance or from 1 allowance to 0 allowances). This will slightly decrease your take-home pay each payperiod, but the extra taxes you pay each payperiod will assure you don’t owe anything at the end of the year.
On the other hand, if you received a $1,500 tax refund and want to use more of that money during the year, you should increase the number of allowances on your W-4.
If you want to adjust the allowances on your Form W-4, you can download a new one from our website here. You can also run different pay scenarios on our free Employee Paycheck Calculator to see how different withholding statuses will affect your paycheck. If you or the family you work for has any questions about modifying Form W-4, give us a quick call at (888) 273-3356. We’re here to help!