You’ve used the IRS Withholding Calculator, but you’re still confused about what allowances to take on your W-4.
We’re here to help! Read through the following scenarios for a basic breakdown, and call us if you still have questions!
- You’re single, the calculator says to take one allowance, but you’re concerned about owing.
- The difference between 0 and 1 is taking 1 allowance means you withhold LESS from each check, therefore less taxes are paid in throughout the year.
- If you only have this W-2, income withholding tables are designed to keep you covered from owing. If you have more sources of income and could potentially owe more, it might be better to take fewer allowances.
- Taking 0 allowances may be seen as safer, but you could be essentially loaning money to the government throughout the year by paying too much in taxes to get a larger refund at the end of the year.
- Taking 1 allowance could be seen as risky if you want to avoid paying ANYTHING to the government come April, but some people see paying a little every April better than loaning money to the federal government interest-free for a year.
- You’re married, both with jobs and 2 kids, and you don’t understand the changing credits and deductions.
- Make sure you work through the Two Earners/Multiple Jobs Worksheet on the W-4, this has been updated for the new tax laws and can help you understand what the allowances are for.
- Filing your W-4 as ‘married’ versus ‘married, but withhold at the higher single rate’ results in less tax being withheld from your checks because the tax bracket you would be in as married filing jointly is lower than the same single brackets. If you have more sources of income, or simply prefer a larger refund, it would be in your interest to file as ‘married, but withhold at the higher single rate’.
The beginning of 2019 isn’t the only time you should adjust your W-4! You need to request a new form if you get a new job, get married, have children, or anything else that could change your tax situation.
If you find that when filing your 2018 tax return you’re faced with either a large refund or a bill that exceeds what you’re comfortable paying at once, you should reevaluate your withholding to prevent that situation from occurring again.
We here know that taxes are daunting for most and we’re here to help. Give us a call or contact us today to give you financial peace of mind.
