Are you expecting a tax refund? Did you file your tax return early so you can get an express refund? In 2016, taxpayers received refunds averaging $3,120. This means if you got a refund, you were one of the millions who loaned $300 billion to old Uncle Sam. It’s great getting a large check during tax time, but wouldn’t it be nice to have a little extra cash every paycheck? You can! All it takes is one small change.
Change your paycheck withholding
It starts with making changes to the amount of federal income tax withheld from your paycheck. This is also known as your withholdings.
When you started your job you filled out a lot of forms, including a Form W-4. That’s the Employee's Withholding Allowance Certificate. Most of us rarely think about the form after that. But it’s a key part of your tax planning, especially if you want more of your money up front. To get started, tell your employer you need to complete a new Form W-4.
Review your deductions and credits
Getting your withholdings right is worth the effort when it leads to more money in your pocket each pay period. The key is to claim the correct number of allowances. Use the Deductions and Adjustments Worksheet if you itemize deductions, have credits due or have adjustments to your income. If you are married and will file jointly or if you work multiple jobs this worksheet will be helpful, too.
If you prefer an online solution to revise your Form W-4, the IRS Withholding Calculator is a great shortcut. Just gather your recent pay stub and last year’s tax return then plug in the numbers. The calculator will do the math and you can use the results to fill out Form W-4.
Give your newly completed Form W-4 to your employer. Now, kick back and enjoy having more control of your money and meeting your financial goals.
This article is part 3 of 3 in the “Let’s Talk Taxes” series presented by LGFCU.
The advice provided is for informational purposes only. Contact your tax advisor for additional guidance.