Top 5 reasons to adjust your W-4 withholding
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What's a W-4 and why should I pay attention to it?
- Do this whenever you have a major personal life change.
- The goal is to reduce the potential for a tax bill and have a tax refund at zero or close to it.
- If you count on a big tax refund every year, you should also pay attention to your withholding because how much you have withheld directly impacts your refund.
1. You get a second job
2. Your spouse gets a job or changes jobs
3. You’re unemployed part of the year
4. You get married…or divorced
5. You have a baby…or adopt one
How to adjust your W-4 withholding
- Aims to reduce the complexity of calculating how much to withhold and increase the transparency and accuracy of the withholding system.
- Uses the same underlying information as the old design.
- Replaces complicated worksheets with more straightforward questions.
- If the result from the W-4 calculator is different from your current withholding, ask your employer for a fresh W-4 form to fill out.
- If you're married and both of you work but earn different levels of income, you can use the Step 2(b) — Multiple Jobs Worksheet to calculate how much extra withholding the higher earner will need to withhold in box 4(c).
- The new W-4 also allows you to approximate how much you plan to deduct on your 1040 (either claiming itemized deductions or the standard deduction) and place this in box 4(b).
- Should you have income from other sources (not a job), you can report it in box 4(a) to change how much money your employer withholds from your paycheck.