A few years ago, the withholding tables were changed to allow larger net pay in America. In that year, the rates did not change, just the tables. This lead to larger paychecks and the increased consumer spending that was the goal, but it left many Americans owing a tax bill when they settled up by filing that year’s income tax forms. These surprises could have been avoided.
Although this year’s withholding tables do not currently represent any sort of consumer spending games, and there is no requirement that you submit a new W-4 form each year, reviewing and updating your Employee’s Withholding Allowance Certificate (Form W-4) once or twice a year can help prevent a year end surprise while keeping the optimum amount in your net paycheck throughout the year.
Life changes and undesired tax return results. Did you get married or divorced? Do you have another dependent or two? Did a dependent get married? Did you move to a different State, city or town, or do you live in a different county or local taxing jurisdiction? These life changes can greatly affect your needed withholding level.
Did your last tax return present you with an unbearably large amount due, or equally disturbing, a huge refund that could have made life easier throughout the year?
How do you make the right change to your W-4 form? We will address that question next week.