I hear far too many people each year say, they said I could go exempt for six months and change my exemptions back to normal. Well my first question, who is they and why would you go exempt without having the proper deductions or credits to offset the tax liability. This blog is to help those that have filed exempt status this year and have never changed it. If you find that you have to pay more taxes than you can afford, then your IRS Problems may have just begun. If the reason your taxes are high comes from your withholding taxes, now may be the time to make some changes. If you find your self receiving additional income back on your pay check but you owe the IRS each year you will want to decrease your withholdings.
When you start a new job you are required to fill out Form W-4 (Employee’s Withholding Allowance Certificate) indicating how many allowances you want to claim. This determines how much federal income tax is withheld from your pay during the year.
Your goal is to have your withholding match your actual tax liability. You will owe more taxes at the end of the year if enough tax is not withheld.
If you have had changes in your personal or financial situation, you may want to adjust your withholding. These changes include:
� Marriage
� Divorce
� Birth or adoption
� New residence
� Retirement
� Change in job or loss of job
� Interest, dividends, capital gains
� IRA distributions or deduction
� Alimony expenses
� Medical expenses
� Gifts to charity
When to Check Your Withholding
You should check your withholding early in the year so if you need to make any changes it will take effect for the rest of the year. It will be especially important to check your withholding if you prepare your tax return and find that you either get a big refund or you have to pay more than you can afford at one time.
How to Adjust Your Withholding
To adjust your withholding you need to give your employer a new Form W-4. To increase your withholding you will either decrease the number of allowances or enter the amount you want withheld from your paycheck. If you want to decrease your withholding, you need to increase the number of allowances. Remember, you can only claim the number of allowances you are entitled to.
If you find a need to adjust your withholding, contact your personnel or payroll office at your employer. If you have IRS Problems I can help you with the process or any other IRS Problems you may have. Call me at 310-283-3767.
Tax Time Tips 