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Are My Paychecks Having Enough Taxes Withheld From Them?

2011 Form W-4Do you ever wonder if you are having enough taxes withheld from your paychecks? Do you either have large refunds or balances due when you file your tax returns? Proper planning based on what you currently take in as income throughout the year, and factoring other areas of your tax profile with a trusted advisor will increase your chances of having less of a potential liability or large refunds.

 

Tax Withheld based on Form W-4 and Earnings

The Form W-4 that you fill out with your place of employment, along with how much you earn, will determine the total amount of tax withheld automatically from each paycheck. The amount withheld can fluctuate based on changes in income or changes to the variables on Form W-4. You can obtain a copy of the 2011 Form W-4 from the IRS website here: http://www.irs.gov/pub/irs-pdf/fw4.pdf. You should consider adjusting your Form W-4 each year, and when financial or personal circumstances change.

 

Form W-4 Accuracy Considerations

In most cases, properly filling out Form W-4, will help the amount your employer withholds come fairly close to what your actual tax should be on your tax return. Other situations that could affect your tax situation and make your withholding inaccurate even if you filled out Form W-4 correctly might include some of the following:

 

  • You have multiple jobs
  • You have a spouse that also works
  • You have other income such as interest, dividends, alimony, unemployment compensation, or self-employment income
  • You owe additional taxes for self-employment, unreported social security and Medicare, IRAs, other qualified retirement plans, etc.
  • You had life changing situations that should have been changed on Form W-4 such as getting married/divorced, added a dependent, or your income fluctuated throughout the tax year

 

To ensure you are taking into account all the possible scenarios that could affect your yearly tax liability, you should consult with your tax professional throughout the year. They understand how life events can change your year-end financial situation.

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