MEB Resources | News & Tips

The W-4 form and when to make changes

November 30th, 2015 · 1 Comment

From my experience, one of the most dreaded forms to complete in the onboarding process is the W-4. I’m pretty sure it’s because it directly affects your paycheck and is linked to the IRS so it makes people (including myself) pretty nervous.  If you claim too much, you will have to pay in at the end of the year.  If you don’t claim enough, your paycheck will be smaller than it needs to be throughout the year and the IRS will hold some of your money for you – and you’ll get a refund – which is always a pleasant surprise in the springtime, but could be invested or used for something very much needed prior to then.

There are numerous websites and resources to assist with filling out the W-4 form, from the IRS website to TurboTax. The form itself is easy.  It’s that Line 5 where you write in the number of allowances you are claiming that brings on the sweats!  The truth is, don’t make it any harder than it has to be.  At the top of the form there is a Personal Allowances Worksheet that walks you through what you should claim.  If you have no dependents and no spouse, you probably want to claim “1”.  If you’re looking for a refund, claim “0”.  If you are married and filing jointly, you should chat with your significant other so you are both claiming correctly.  (You can always consult your HR person or a Tax Specialist if you are unsure.)

Line 6 can also be intimidating because it asks you to write any additional amount you want withheld. My first thought is always “why on earth would I want any additional money withheld from my paycheck?!”, but there are circumstances when this may be beneficial.  If you think that you may owe a significant amount of federal taxes, it makes sense to put in a dollar amount so you don’t have to write out a big check at the end of the year.  When would you consider this – perhaps if you or your spouse stop working or are self-employed.  Again, your HR person or a Tax Specialist would be able to assist with this.

The good news is you can change your withholding allowances for any reason, whenever you would like. Keep in mind it’s your money, so you should pay close attention to how much is being withheld and how it affects you at the end of the year.  There are certain times (life events) when you should change your W-4 such as:

  • You get a second job. If your income goes up, your tax liability goes up as well.
  • Your spouse has a change in income. Again, any change in income could put you in a different tax bracket. Better be safe than sorry and owe at the end of the year!
  • You’re laid off or not working for part of the year. You will want to make sure you didn’t have too much or too little withheld.
  • You get married. Any change in your marital status will change your tax rate! Adjust accordingly.
  • You add a dependent. Having a baby or adopting is a major tax event. Be sure to check with your tax specialist as well because you will likely qualify for other tax benefits as well!

Good luck!

 

One Response to “The W-4 form and when to make changes”

  1. […] We are in the tax refund (hopefully) season – which is a direct reflection of how you fill out your W-4, so it’s a great time to review what you claim!  Check out the post The W-4 form and when to make changes. […]

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