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W-4 Tax Witholding
Withholding taxes and W-4's for your federal income taxes. If you are an employee, generally your employer will withhold income tax from your paycheck. Taxes can also be withheld from other income, such as bonuses, gambling winnings, commissions, unemployment compensation and pensions. Two things determine the amount of tax withheld from your pay, the amount you earn and the information you gave your employer on your form W-4. There are 3 types of information your employer uses to determine the amount withheld: To withhold at the single rate or the lower married rate, how many withholding allowances you claim, and if you want to withhold any additional tax. You can change your W-4 information at anytime, like if you want to change your withholding allowances. If you are married and get divorced, or if there is an event that decreases your withholding allowances, you have 10 days to file a new W-4 with your employer. If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split your allowances between the Forms W-4 for each job. You cannot claim the same allowances with more than one employer at the same time. You can claim all your allowances with one employer and none with the other(s), or divide them any other way. If you do not give your employer a completed W-4, they must withhold your tax at the higher rate. Also, you can change your W-4 as often as you like. This has just touched on the basics of federal tax withholding and W-4's. If you need more information, contact your tax preparer, accountant or tax attorney, or see Publication 505 or 919. Remember one thing though, if you get a big refund every year, you are giving the government an interest free loan. It is to your benefit to reduce your witholding so you have more money in your pocket every week, and you can put that money into and interest bearing account and have that money earn for you.
Timothy Watson is a tax preparer during the tax season. |
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