When to Change Your Withholding

Maybe you’ve heard wedding bells ring in the past year. Maybe you welcomed a new little one into the world. Maybe you got a huge refund (lucky you!) and you want to pocket that cash throughout the year. Or maybe you owed a big chunk of change on April 15th. When life changes, your taxes might, too.

There are lots of reasons to change your tax withholding. If any of these scenarios apply to you, then you might benefit from reassessing your tax withholding:

• You received a big refund, and you want more money in your pocket now. If you receive a large refund, remember you have made an interest free loan to the U.S. Government.
• You had a large tax bill, and you don’t want that to happen again next year.
• Your tax situation is only approximated by the form W-4. If you had more than one job at the same time, if you’re part of a couple where you’re both employed, if you can file as Head of Household or you have several children eligible for the Child Tax Credit, this could apply to you.
• You are both individuals but a working couple, and the Medicare surtax isn’t being withheld.
• You have non-wage income that is more than your adjustments and deductions.
• You’d rather have your wages withheld than make estimated tax payments.

What life events may cause you to need to change withholding?

• Getting married – If your spouse has income, your household tax liability may go up. If your spouses doesn’t have income, it may go down.
• Getting divorced – In addition to changing your household income, alimony affects your tax situation. If you’re paying, it makes your liability go down, and if you’re receiving, vice versa.
• Having or adopting a child – Adding a dependent will make your tax liability go down. If you’re paying for daycare, that’s another big deduction.
• Losing a dependent – Once you can no longer claim your children as dependents, your tax liability goes back up, and you’ll need to adjust your withholding.
• Buying a home – There are a number of write-offs that come with being a homeowner. Conversely, if you sell (or lose) a home and become a renter, you may need to bump up your withholdings.
• Working a second job – If you have a second source of income for the year, you’ll need to adjust your withholdings to reflect the extra income.
• Making more non-wage income – If you start a side-business or make money from dividends, sales of stocks and bonds or interest, you’ll need to change your withholding on your regular W-2 wages to avoid a tax bill at the end of the year. Also, if you’ve lost a source of non-wage income, you should reassess your withholdings.

You can click through the IRS Withholding Calculator to help you figure out exactly how much you should be withholding from your paycheck.

What documents do you need to run the calculator?

• Your most recent paystubs
• Your most recent tax return

If you’ve run through the calculator and your withholdings are different and you want to change your withholding, you’re going to need to fill out a new W-4 form and submit it to your employer. If you are self-employed, you may need to change the amount you submit quarterly.

Remember, withholdings are deemed to occur ratably over the year so, so if you find yourself with a shortfall towards the end of the year, you can request your employer to withhold additional funds.

Withholdings also don’t have to be calculated through the number of exemptions you take. You can tell your employer on your W-4 how much you want taken out each pay period.

If you would like more assistance calculating your withholdings and completing the paperwork, contact Myerson & Myerson, CPA’s at 703-753-1040 or info1@mandmcpas.com.

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