We receive a huge refund each year and someone told us that we should change our W4 so that we can get the money now vs. the government having it. Has anyone ever done this?? How do you go about doing it?
Do be careful, as someone mentioned, about under-withholding--we got dinged for that a few years back and now we're back to a huge tax refund.
You can pull up a W-4 and print it on the IRS's website, fill it out and turn it in to your payroll/human resource department.
What I prefer to do is calculate what I believe my tax liability will be for the next year and tell my payroll department that this is what I want withheld every week. The problem with W-4s is they go with 1,2,3 blah blah blah, but that only takes into account your income and members of your family. I have over 20,000 in deductions so if I went with the W-4 formula I would be over-withholding around 5,000 dollars a year.
And I am good at math. :p
Oh when you start messing around with this be warned there is an under-withholding penalty. You must! withhold at least as much as your previous years tax liability. States nail you on this too. :(
Probably you're withholding at the "single, no dependents" level, which is the highest withholding. Just change it to married, and however many dependents you have. That will lower your withholding. The HR/payroll department where you work can give you the paperwork to do this.
We claim zero on our w4, that way you get more money on your paycheck and you can save or do with it what you want. If you have to pay a little or break even, it's a good thing.
I know I over withhold, but I like getting a big check at tax time. I put it away and use as necessary during the year. I don't really care that the government holds my money until my refund. Am I going to make much on it in interest? No. I will spend it.
All you need to do is tell your employer you want to change it. You are allowed to do this once each year. there are many calculators out there that will help you determine what you shjould be withholding.
HOWEVER, I would suggest holding off at this moment in time. Right now unless new tax laws are passed everyone's taxes are going to go up significantly next year when the current tax cuts expire. This could potentially mean an increase in your tax burden of about $3,600.00 per family. The marrige penalty, child care credit and many other deductions & credits you may now be getting will disappear and the overall tax rate will go up. Bottom line is we have no idea how much you may have to pay for 2012 so in my mind I say better safe than sorry & leave it as is until you know what is going to happen.
Before getting married, my husband prescribed to the school of getting as much money as he could in his paycheck. He now owes the IRS over $30,000 for 4 years worth of tax returns. He has since seen the light and prescribe to my school of philosophy. Let them owe you.
Our refund for 2011 was almost $10,000 but we won't see a dime of it. It will all go towards paying his debt to Mr. IRS.
I'd rather get a huge check from them than owe them a dime which is what you risk when you tamper with the withholding on your W4.
It really is a matter of personal preference.
All you have to do is ask your employer for another W-4 form to fill out. Once your turn in the the new W-4, your employer should start withholding taxes based on your new W-4.
Use the IRS Withholding Calculator. If you put in accurate information, it will give you a suggestion for your W4. If anything about your financial situation changes throughout the year, you should use it again to make sure things stay in the best scenario.
http://www.irs.gov/individuals/article/0,,id=96196,00.html
If there are changes to make, you can even fill in and print a W4 to give to the employer(s).
In my case, with a family of 4 and our income sources, we exempt 9 from Federal.
The calculator I linked to is only for Federal taxes. If you have state taxes, you might be able to find a related calculator on the your state's IRS site.
don't listen to Grandma T - claiming Zero is the highest deduction.
You need to talk to the person who handles the pay at your work. Find out your current rate. They can also probably tell you what your pay amount will be if you raise your deductions. They have a w4 form that you can fill out to change your rate.
You have options. You can check the box for 1 dependent, 2 dependents, 3 dependents, etc..it all depends on what you want out of the tax situation.
I wanted to have the big check once per year to have a sort of savings. That was something we enjoyed doing and planned ahead for.
If you do change your paperwork for taxes then you also need to be aware, it IS possible to do it where they only hold out the minimum and you do get a lot more on your regular check but it could turn out where you actually have to come up with money on April because you didn't pay in enough.
So change the number of dependents (exemptions) to a higher number.
