Update for Fiscal Year 2016
when you file your tax return, a smart financial move is to check your W-4 form. Ensure you have the right amount of tax withheld from your wages can make a big difference on your taxable income next year.
If you have too much restraint, like many Americans, you can not make the best use of your money.
If you have too little withheld, you could face a large tax bill and potential penalties and interest when you drop the following year.
regarding your finances, it is important to take the time to learn about the W-4 form and determine if you need to make revisions and submit a new one.
to help you navigate the process, below are the answers to frequently asked questions on the Form W-4.
Why my employer withhold much?
Your employer has no discretion over the amount of tax is withheld from your salary.
your employer is required to withhold the amount for IRS withholding tables. The table is broken based on your salary, the length of time and the information on the W-4 form you filled.
What is a withholding allowance?
A withholding allowance is a number that your employer uses to determine the amount of tax on federal income and state to withhold from your salary. The more allowances you claim on your W-4 form, the less income tax will be withheld from each paycheck.
The number of exemptions you must ask varies and is based on a number of factors, such as marital status, employment status, earned wages, filing status and child or dependent care expenses. The number
Is withholding allowance to the same source as a dependency exemption?
No, a withholding allowance is not a dependency exemption. However, they are more or less linked.
The size of a withholding allowance is based on the annual value of a dependency exemption. For 2016, this amount is $ 4,050.
A mistake some people often make is assuming they can not claim as many allowances as the number of children they have. This is not true. In fact, it may be best to seek more quotas than the number of children you have if you have multiple children. However, many other factors apart from children can affect the optimal number of allowances you should claim, including additional income, deductions or tax credits.
How allowances affect my pay?
more allowances you claim, the less income tax is withheld from your salary. . Less allowances mean more income tax is withheld from your salary
To put other and
More more quotas corresponding net salary of money in your pocket.
how an additional allocation will change my net salary?
The best way to determine how an additional allocation will change your net pay is to use the W-4 withholding in TaxAct section (located in the Next Year tab) to calculate the difference.
to estimate how quickly a withholding allowance will change your federal income tax withholding, multiply your rate tax bracket by the amount of exemption ($ 4.050 in 2016). Then divide by the number of pay periods in a year.
For example, if you are paid once a week and are in the tax bracket of 25%, you will add a retention allowance to your W-4
Here's how it works :.
25% X $ 4,050 (the amount of exemption) = $ 1,000 (the annual tax benefit of an exemption in the tax bracket of 25%)
$ 988/52 weeks = $ 19.23
This is about the amount of your weekly wage should go with a new W-4 form.
But before going, do not forget your state withholding tax on income that will be affected too.
When you receive your first paycheck with new allocations of withholding, take note of how they affect your salary.
If you think this is not the right amount or if your circumstances change, you can always file another W- 4 form .
Why would I check the "Married but remember only as" box?
you usually have less tax deducted when you check the "Married". Indeed, withholding tables assume you are filing jointly with a nonworking spouse.
If your spouse has a large income, you may need to check the "Married but remember as one" box to have enough tax withheld.
Should I use the spreadsheet that comes with the W-4?
You can use the worksheet on the W-4 form. However, there are ways much easier and more accurate fill out the form.
If you use the W-4 Withholding section in next year TaxAct tab, TaxAct does the calculations for you.
is it better to have more successful, just to play it safe?
choose to have too much tax withheld may feel safer and easier than determining how much you should have retained and how to complete the form for that to happen. However, there is nothing safe to let the IRS take your money for a year or more. The small investment of time to make sure your withholding tax on income is correct is well worth
Many taxpayers do not want to risk having a draft tax law at the end of year -. Regardless of size. If that's how you feel, adjust your W-4 accordingly and plan for a small refund.
You can still celebrate when you get your refund check, the more you can be happy to know that you have not been too many more tax withheld.
How do I file a new Form W-4?
Ask a new form of your payroll or get one from the IRS website.
again, if you use TaxAct to calculate your withholding allowances you can print a blank Form W-4 when finished.
Having updated the new form, take it to your payroll department. Do not send to the IRS.
Why should not I have more tax withheld and receive a large refund at the end of the year?
To make the most of your money, you should try to pay the right amount of tax throughout the year with the exact amount withheld.
for example, if you have an emergency, the money will be in your bank account -. not in the coffers of the IRS
Essentially, you give the only large loan without interest IRS. Look this way, if you have a credit card debt you can pay high interest rates while trying to repay it. The IRS does not pay any interest to you for the money you give them by having too much tax withheld.
You would not want to overpay your mortgage, utility bills or other expenses by thousands of dollars just so you can get a large refund at the end of the year. Why would you do with your taxes?
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