Check Tax Withholdings at Midyear for Possible Take Home Pay Boost

The vast majority of taxpayers get a (federal income tax) refund every year and chances are you are one of them. Statistics annually bear out that three of four individual (1040) tax returns are refund returns, or put another way, about 75 percent get money back. The money they, or you, get back is yours though.

So now that 2012 is half over (went by quick didn't it?) perhaps you can find a few extra bucks to either save or spend now as opposed to waiting until 2013 to receive via your tax refund. How to do so? Read on...

First, some stats. As of early June, the IRS had processed 135 million 2011 individual tax returns and of those 104 million were refund returns. The average refund amount was a shade over $2,700. So as you can see, the Treasury Department is sending a lot of money back to taxpayers for being overwithheld. In other words, most of us have too much in federal taxes witheld throughout the year and get it back in the form of a tax refund, to the tune of $2,700.

To bring the actual tax you pay closer to what you actually owe, take a few mimutes and read about our withholding calculator. This handy, online tool will help you get an idea of what your tax withholdings should be based on your entire tax/financial situation so that you can bring the number as close to zero as possible...if, of course, you wish to do that.

You may need to submit a new Form W-4 to your employer or adjust what you pay in taxes if you are self-employed but the bottom line is to get you to think about it and make a change if comfortable. IRS Form W-4 is the form you use to inform your employer how much tax to withhold throughout the year so making an adjustment based on this form is all many will need to do. If your situation is more complicated, however, or if you simply feel more comfortable doing so, you might then wish to see a qualified tax professional for some midyear tax planning.

Who benefits? Straight from IRS.gov:

Who Can Benefit From The Withholding Calculator?

• Employees who would like to change their withholding to reduce their tax refund or their balance due;
• Employees whose situations are only approximated by the worksheets on the paper W-4 (e.g., anyone with concurrent jobs, or couples in which both are employed; those entitled to file as Head of Household; and those with several children eligible for the Child Tax Credit);
• Employees with non-wage income in excess of their adjustments and deductions, who would prefer to have tax on that income withheld from their paychecks rather than make periodic separate payments through the estimated tax procedures.

Another useful resource is IRS Publication 505, Tax Withholding and Estimated Tax (PDF attached).

Keep in mind that your taxes are just part of your overall financial picture but still not a bad idea to consider them outside of the tax filing season if applicable to you.