Many of our clients come to see us after they have visited their accountant or tax preparer, believing they were going to receive a nice refund only to find out they owe Uncle Sam money instead. Not only did they think “I have money coming,” they frequently have borrowed thinking “I can pay this right back with my refund.” So now, they are doubly in trouble with both a loan to pay back as well as a tax bill. What? I encourage you to fix the problem now so you will not have this issue next year.
We are at the beginning of March so you have 10 months to fix and thus avoid this problem from happening again next year. The amount of taxes you withhold is a personal choice, so you can adjust the amount at any time.
How to Adjust the Amount Withheld from Your Paycheck
One way to do it is through the IRS form titled, Form W-4, also known as the Employee’s Withholding Allowance Certificate. You can complete the form and submit it to your employer. Your employer then uses the form to calculate the amount of federal income tax to be withheld from your pay. Let them do the hard math.
Typically, if you follow the instructions on the Employee’s Withholding Allowance Certificate (Form W-4), you will come out in great shape. It will keep you from owing a tax debt each year. On the flipside, if you are getting a large refund each year, it will adjust your monthly taxes down, giving you more money each pay period throughout the year so you and the IRS are square at the end of the year. For example, if you are receiving $4,800 each year as a refund, then it will adjust your paycheck and you will pay less taxes and put $400 more in your pocket each month.
If you have more than one job, make sure your Form W-4 is correctly filled out and submitted to that employer as well.
Another way to adjust your taxes if you owe a tax bill is to immediately go visit your payroll department and ask them to take out an additional amount each month. What extra amount do you tell them to take out you might ask? Just look at the amount you owe from your tax return and divide by 10 (or the number of remaining months in the year). If you owe $1,000, ask your employer to take out an additional $100 per month for the balance of this year starting immediately.
Taxes are very complicated and if you owe a tax debt of any kind, and are wondering how to deal with it, please contact us to schedule an appointment for a free initial consultation. If you would like to discuss your options for dealing with your debts, please contact us. The attorneys at Bond & Botes will analyze your situation and help you make the best decisions possible to help you eliminate your tax debt along with all your other debt as well. We want you to live in financial peace and without burdensome worry. We can help you!