It is important that you properly estimate your tax withholding. If an insufficient amount of taxes is withheld, you may owe a substantial sum, including penalties and interest, when you file your tax return. Choosing the correct withholding amount for your salary or wages is a matter of completing Form W-4 worksheets; providing an updated Form W-4 when your circumstances change, and perhaps becoming familiar with IRS Publication 919, which deals with withholding.
Two factors determine the amount of income tax your employer withholds from your regular pay: the amount you earn, and the information regarding filing status and withholding allowances that you provide your employer on Form W-4. If you accurately complete all Form W-4 worksheets, and you do not have significant nonwage income (e.g., interest and dividends), it is likely that your employer will withhold an amount close to the tax you owe on your return. In the following cases, however, accurate completion of the Form W-4 worksheets alone does not guarantee that you will have the correct amount of tax withheld:
- When you are married and both spouses work;
- When you are working more than one job;
- When you have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income;
- When you will owe other taxes on your return, such as self-employment tax or household employment tax, and/or
- When your withholding is based on obsolete W-4 information for a substantial part of the year (e.g., you’ve gotten married, gotten divorced, gained a dependent, experienced income fluctuations).
To ensure that you have the correct amount of tax withheld, obtain a copy of IRS Publication 919. It should help you compare the total tax to be withheld for the year to the tax you anticipate owing on your return. It can also help you determine any additional amount you may need to withhold from each paycheck to avoid owing taxes when you file your return. Alternatively, it may help you identify if you are having too much tax withheld.
At Henssler Financial we believe you should Live Ready, and that includes having a tax projection to determine if you need to increase or decrease your federal withholding. If you have questions regarding your taxes the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
