Not Made Of Money

Have you received your tax refund yet? Now that the deadline for filing incomes taxes has passed, many people have switched from dreading their taxes to anxiously awaiting their refunds. Did you know, though, that you don’t have to wait? If you always get a hefty refund, a simple change in your income tax withholding can allow you to keep that money in your wallet where it belongs.

Deciding if you need to change your withholding is a relatively easy decision. Look at your tax returns for the past two or three years. Do you consistently receive the same amount as a refund? Next, look to the future. Will your lifestyle this year be the same as it was last year? (Consider job status as well as family size.) If you answered yes to both questions, then changing your withholding is definitely a good idea for you.

Changing your withholding is as simple as completing a form with your employer’s human resource department. All you have to do is request a W-4 form and fill it out with your new withholding information. Once you turn it in, you should see your take home pay rise and your federal withholdings decrease.

Before you think this all sounds too easy, though, there is a catch. You have to figure out what to put on your new W-4. Unfortunately, the form doesn’t allow you to simply put in the dollar figure that you want to have withheld from your weekly paycheck. Instead, you have to select a filing status (married or single, for instance) and specify a number of exemptions.

There is a worksheet included in the W-4 form to help you determine what your exemptions should be. It takes into account lots of details about your tax returns, such as itemizing deductions, paying for childcare, or even working more than one job. Since you have to have so many details to complete this worksheet, you’ll want to have your latest tax return handy as you low through the worksheet.

If this all sounds like Greek to you, there is one other option. When you have your income taxes prepared simply take your current pay stub and a W-4 form with you. Ask your tax preparer to help you fill your new form out. You may have to pay a minimal fee for his help, but knowing that you’re paying the right amount of income tax will be well worth the extra cosst.

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