Form W4 Help
Q. I need to change my withholding for federal and my state. How do I do that?
A. This is one of the great mysteries of life for most employees. How does payroll come up with those tax and deduction numbers on my paystub? When you first started working at your company, your Payroll or Human Resources department gave you several forms for completion. One was the I-9 which proves your right to work in the U.S. Another was the Form W-4 and perhaps another was the state version of this form. The Form W-4 tells the payroll department how to withhold Federal Income Tax from your paycheck. You select a filing status and a number of withholding allowances. Most people gloss over this form and choose filing status based on their marital status and choose the number of allowances to match the number of people living in their home. They then forget about this form and wonder why they get either a very large refund or are required to pay a lot extra at tax time.
The sad part is, for most employees, this is the best way for you to plan for your tax bill. Once you have completed a tax return, you can then estimate what you feel your tax liability will be for the following tax year. Using one of the free Paycheck Calculators found at PaycheckCity.com, you can quickly see what the correct number of allowances may be to pay that liability each pay period from your check. You also will want to talk to your CPA or tax adviser in case there are any unique pieces to your situation.
Claiming more allowances means less withholding and claiming less allowances means more withholding. You don’t need to change these values each time you get a check. The ultimate goal is to match your liability with your payments throughout the year. Simply get a new Form W-4 and submit it to your Payroll Department representative to change your settings.
The next few blog entries will deal specifically with other W-4 related issues.
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