The W-4 change is a result of the 2018 tax reform bill. The new form was redesigned to make it easier to understand and to make the whole withholding process more accurate and crystal clear. If you’ve consistently owed taxes or gotten a huge refund each April, you need to take a closer look at your W-4.Īnother reason to check in on your withholdings this year? The IRS gave the W-4 form a big makeover starting in 2020. So, what if you’ve been at your job for a while now and you haven’t had any big life changes in the last year? Well, you don’t necessarily need to fill out a new W-4 form each year, but it’s a good idea to make sure you’ve got your withholding set up right. This form tells your new employer how much money to take out of your paycheck for taxes. When you start a new job-or have a major life change, like getting married or having kids-you’ll need to fill out a W-4 form. of A., everyone who earns an income is supposed to pay income tax to the federal government (and your state, if you live in one with a separate income tax). If you haven’t recently, check with your employer to make sure you’re having them hold back just enough to cover your tax obligations (we’ll show you how to do that below). You want your withholding to be just right so you break even when tax time rolls around. Too little withheld and you’ll end up owing the government money. Too much withheld and you’re giving Uncle Sam money without any interest. You want to go for the Goldilocks approach. Nope! All a big refund means is that you’ve been loaning Uncle Sam your hard-earned cash interest-free. A lot of people think getting a nice juicy refund is like getting free money. When tax season comes around and you finish filing, you’ll either get a refund or owe additional taxes. So what’s the deal with federal tax withholdings? Glad you asked! Let’s dive into what you need to know.īasically, federal tax withholding is where your employer takes a certain amount of money out of your paycheck for taxes and sends it to the federal government on your behalf. It all comes down to getting your federal tax withholding set up just right on the front end. (Same.) But like it or not, you’ve got to arm yourself with knowledge so you don’t end up in trouble with Uncle Sam (he can get a little cranky when it comes to his money) or overpay him all year. We know just thinking about taxes can make you want to take a nap and not wake up till April’s over.
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