What’s Up With My Withholding?
It may be time to look at your federal withholding…
Withhold more and get a bigger refund!
Withhold less and you may have to pay!
Changes abound in the new year, from the big to the small. In 2019, you may have had some changes in your life that will affect how much you will owe in taxes moving forward. If you
Got married or divorced
Brought a child into your family
Started a second job
Saw a substantial change in income
It may be time to look at how much you are withholding from your paycheck. You may be withholding too much now, and that will give you less money day-to-day, but will result in a larger refund come April 2021.
But if you’re withholding too little, you may find yourself with a bill from the government in 2021. Keep on top of it, and you won’t be surprised next year when you’re filing your taxes.
One way to check the ‘health’ of your paycheck withholding is to check out the IRS’s Tax Withholding Estimator Tool. It’ll give you a sense of where you are, and what you can expect when you do your 2020 taxes. If you don’t like what you wind up seeing, it may be time to make a change to your withholding.
To make changes, you’re going to have to submit a new W-4. This form was changed for 2020 to, in the words of the IRS, “reduce[ ] the form's complexity and increase[ ] the transparency and accuracy of the withholding system.”
Translated: that means the IRS tried to make it easier for you to understand, and harder to mess up.
You can find the new W-4 here, on the IRS’s website. Like the old W-4, this one includes some worksheets and tables designed to help you determine what to take out of each paycheck. It’ll ask you
How you’re filing for the year
The number of qualifying children or dependents you have
Any additional income you’re expecting; like investments, dividends, or retirement income.
Once you’re done, submit it to your employer following their procedures. And if you have any questions, you can ask your company’s HR.
Keeping on top of your withholding is one way to keep track of your financial health, and a great way to make sure you have a Good Day!