Income Tax Withholdings

The filing deadline for federal tax returns was two days ago, April 15. If you received a large refund or owed a lot, you might want to consider adjusting your withholding levels by filing a new IRS Form W-4 with your employer.

If you got a big refund, don’t think of it as a gift from the government – because it isn’t. What has really happened is that you had your employer withhold too much from each paycheck, essentially giving the federal government a free loan for the year. Decreasing your withholdings, in this case, would put more money in each paycheck, rather than getting it all back in one large lump sum at tax time.

If you owed money, don’t think the government is out to get you – because it isn’t. What has really happened is that you had your employer withhold too little from each paycheck, creating a tax liability for you at the end of the year. If you do this too often or end the year with a larger than normal liability, the IRS might start taking a closer look at your tax return and may even charge penalties.

To make an adjustment to your withholding levels, simply complete a new IRS Form W-4 and submit it to your employer’s payroll department. A useful tool provided by the IRS to help determine how much to withhold can be found here.