Your Paycheck Today Can Affect Your Tax Return Later

Your Form W-4 Matters

When you start a job, experience certain life changes, or decide to adjust your withholding, you may complete Form W-4, Employee's Withholding Certificate.

The information provided on your W-4 helps your employer determine how much federal income tax to withhold from your paycheck.

Changes involving your household, income, dependents, multiple jobs, or other financial circumstances can sometimes mean the withholding amount that worked previously may no longer reflect your current situation.

Life Changes Can Affect Your Taxes

Consider reviewing your federal tax withholding when you experience significant changes such as the ones below. You do not necessarily need to change your withholding simply because one of these events occurs, but these situations can be a good reason to review it.

• Starting a new job
• Working more than one job
• Getting married or divorced
• Having or adopting a child
• A dependent no longer qualifying
• A spouse starting or leaving a job
• A significant increase or decrease in income
• Receiving income that may not have taxes automatically withheld
• Owing an unexpected tax balance in a previous year
• Receiving a much larger refund than expected

A Large Refund Is Not Always the Goal

Many taxpayers enjoy receiving a large tax refund. However, a refund generally represents money that was already paid toward your tax liability during the year.

Rather than focusing only on getting the largest possible refund, consider whether your withholding reasonably reflects your expected tax situation and personal financial goals.

For some taxpayers, having more accurate withholding can help reduce the chance of an unexpected tax bill while allowing them to keep more of their money in each paycheck.

Don't Wait Until Filing Season to Review It

By the time your tax return is prepared, the withholding decisions for that tax year have already been made.

Reviewing your paycheck and withholding earlier gives you more time to make adjustments when appropriate.

The IRS also provides a Tax Withholding Estimator that taxpayers can use to help evaluate their federal income tax withholding.

IRS Tax Withholding Estimator

Preparing Now Can Mean Fewer Surprises Later

Good tax preparation is not limited to gathering documents in January or February. Taking time during the year to understand your paycheck, review withholding, organize tax information, and consider major financial or household changes can make filing season easier and help reduce unexpected surprises.

Need Help Preparing for Tax Season?

Reid Tax Service helps individuals and families prepare for tax season with professional tax preparation services and practical year-round tax information.