Every client is different. Some like a big refund with their tax return as a “forced savings” for that family vacation or home improvements. Some like to “break even” and get their money during the year for monthly expenses. Whichever you are NOW is the time to review your tax withholding.
If you are a W2 employee, look at your 2016 tax return (form 1040) page 2, line 63. This was your “total tax” for the year. If all things remain the same, for example wages, interest income, dividends, etc., then you will have a pretty good idea of your 2017 tax liability. Now look at your last paycheck stub under “federal withholding”. Do the math.
If you think you will need more withheld from your paycheck each pay period, then go to your employer and get form W4. If you want MORE withheld, DECREASE the number of your allowances (line 5). For example, if you claim Married with 4 allowances, decrease that to 3. More money will be withheld each pay period.
On the other hand, if you feel that too much is being withheld, INCREASE the number of your allowances.
If you do not claim any allowances (Married 0, or Single 0) and you want more money withheld from your paycheck, use line 6 “Additional Amount Withheld”. Enter $10, $20 or whatever amount you feel you will need and your employer WILL withhold that amount from each paycheck. Keeping in mind that your take home pay will be less but the year-end benefit will be greater.
There are more ways you can change your W4 withholding to optimize your tax benefit at the end of the year.
Please contact Thomas M DiTullio Accounting so we may discuss your personal tax situation. We will be happy to assist you.