You should change your withholding whenever personal or financial changes affect your tax liability. When you begin a new job, fill out IRS Form W-4 (Employee’s Withholding Allowance Certificate) to determine the amount of tax that your employer withholds from your pay throughout the year.
You must file a new W-4 with your employer within ten days of a decrease in the number of your withholding allowances or if your filing status changes to single.
Change your withholding amount as early in the year as possible, or when any of the following occur:
- You receive your first paycheck for a full pay period after tax rates have changed.
- You receive a large tax refund.
- You owe more taxes with your tax return than you can comfortably pay.
- You owe interest or a penalty with your tax return.
- There are tax law changes that affect your tax liability.
Examples of life changes for you or your spouse that may require a change to your withholding amount include:
- Marriage or divorce
- Birth or adoption of a child
- Loss of an exemption
- Purchase of a new home
- Retirement
- Loss of a job
- Acquiring an additional job
- Increases or decreases in other income, income adjustments, or itemized tax deductions or credits.
Income that is not subject to withholding, but which may affect your withholding, includes:
- Interest or dividends
- Capital gains
- Self-employment income
- IRA (Individual Retirement Account) distributions.
Income adjustments that may affect your withholding include:
- Alimony payments
- IRA deductions
- Student loan interest deductions
Itemized deductions or tax credits that may affect your withholding include:
- Medical expenses
- Taxes
- Interest expenses
- Charitable gifts
- Job expenses
- Education credit
- Child tax credit
Learn more about changing your withholding amount from IRS Publication 919, “How Do I Adjust My Tax Withholding?”
The post When Should I Change My Tax Withholding? appeared first on AllBusiness.com.
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