![]() For example, the birth or adoption of a child can change the number of dependents claimed, or the return of a spouse to work may call for increased withholding in order to avoid a significant bill at tax time. ![]() There is no limit on how often you can update your W-4 during the year to keep up with changes in your situation. ![]() W-4s can only be updated once a year ( FALSE). Unless the W-4 forms for both spouses reflect their current situation, their combined withholding can be substantially different from their tax liability, possibly resulting in an unwanted surprise at tax time or even a penalty for underpayment. When both spouses are employed and file a joint tax return, their Federal income tax will be based on their combined earnings, deductions and credits. If spouses are both employed, only one spouse needs to complete a W-4 form ( FALSE). Rather than having the IRS save up your money for you, without having to pay interest, consider setting up a direct deposit of the same amount from your paycheck to a savings account where you can actually earn something on the money you're having "withheld." How does your Form W-4 knowledge compare to the average American taxpayer? The simplest way to make this happen would be to enter the additional amount you'd like to have withheld in Step 4(c), but you may wish to re-think that strategy for a better overall outcome for your personal finances. I'm used to getting a refund – how can I make that happen? Use the IRS Withholding calculatorto get an idea of how much you should have withheld or pay via estimates. One way to ensure enough is withheld without revealing additional information to your employer via the form would be to have additional funds withheld on Step 4(c).Īlternatively, you could pay estimated taxes via Form 1040-ES. You're not required to complete the steps including this information, but be aware that you may need to take additional steps to ensure you're paying enough in throughout the year in order to avoid underpayment penalties. What if I don't want my employer to know about my other income? One of the goals of the form was to make withholdings more accurate, meaning that you are less likely to underpay, but you're also less likely to have too much withheld. Will my tax withholdings change with this new form even if my situation doesn't? While there are still rules that allow for tax deductions and credits for certain dependents, taxpayers no longer automatically get a deduction of several thousand dollars for each dependent in their household. The Tax Cuts and Jobs Act suspended the personal exemptions that were previously allowed for each dependent in the household. What does it mean that exemptions are gone? ![]() It also takes into account the fact that personal and dependency exemptions are currently suspended, so the new form removes allowances and instead takes into account information that affects your taxable income under current tax law. The new version is designed to be less complex so that your withholdings can be more accurate. What's different about this form from the previous version? However, it may be worthwhile to update your W-4 if you were surprised by a significant tax bill or refund when you last filed your income taxes or if your tax situation has recently changed. ![]() There is no IRS requirement for employees to submit new forms, unless you are requesting a change to your withholding or you are starting a new job. Here are the important things you need to know about this new form: The IRS released a new version of the Form W-4 at the beginning of 2020, which is intended to assist payroll departments with determining how much federal income tax to withhold from your paycheck. ![]()
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