Using an IRS-provided worksheet, you would determine the number of exemptions to claim-indicated by a number ranging from 0 to 3. That’s because Form W-4 was overhauled in 2020 based on changes passed in the Tax Cuts and Jobs Act a few years earlier.īefore 2020, your tax withholdings were calculated using personal exemptions, a dollar amount you could deduct from your total income for yourself, as well as for your spouse and any dependents, if applicable. If you haven’t checked in on your W-4 lately, you’ll want to take a gander, says Pete Isberg, an executive with payroll provider ADP. Just as a good retirement plan helps balance your income and taxes over the long term, your W-4 can help do the same each year. But if you overpaid and got a larger refund than expected-which some view as a bad financial move-you can instead use the form to decrease your withholding and increase your take-home pay.įaust says it can help to think of your W-4 as part of your financial plan. “If something in your life changed this year, your W-4 is your chance to get out in front of it so you’re not surprised come tax time next year.”įor instance, if you owed more taxes or got a smaller refund than expected, you can use your W-4 to increase the amount of money that gets withheld from your paycheck. Faust, president of wealth management at Bailard. Yet this form isn’t one to add to the “set it and forget it” stack, says Michael J. Employees need to fill one out whenever they start a new job. Form W-4 tells your employer how much tax to withhold from your paycheck.
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