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Adjusting your tax withholding ensures that the correct amount of tax is deducted from your paycheck. This can help prevent owing money at tax time or receiving a large refund. Knowing when and how to make changes to your withholding can save you money and reduce stress during tax season.
When to Reassess Your Withholding
You should review your withholding if you experience significant life changes or financial shifts. Common situations include getting married, having a child, or changing jobs. Additionally, if you receive a large bonus or other income not subject to withholding, adjustments may be necessary.
Other reasons to reassess include changes in tax laws, a significant change in income, or if you notice that too much or too little tax is being withheld based on your previous year’s tax return.
How to Make Changes to Your Withholding
The most common method to adjust your withholding is by submitting a new Form W-4 to your employer. This form allows you to specify the amount of tax to be withheld from your paycheck.
When filling out the W-4, consider using the IRS Tax Withholding Estimator to determine the appropriate withholding amount. You can choose to have additional amounts withheld or reduce withholding if you expect to owe less.
Additional Tips
Review your withholding at least once a year or after any major life event. Keep in mind that it may take a few pay periods for changes to take effect. Regular reviews can help you avoid surprises at tax time and ensure your withholding aligns with your financial situation.