At this point in
the year, you may want to take a few minutes to make sure what is being withheld
from your paycheck matches (or at least comes close to) your actual prior year
federal tax liability.
If
you're having too much tax withheld, you are allowing the government interest
free use of your money. If you're not having enough withheld, you will owe tax
at the end of the year, and you may have to pay a penalty. Generally, a penalty
will apply if your withholding and estimated tax payments total less than 90 percent
of your current year's tax liability or less than 100 percent of the previous
year's tax (110% if your adjusted gross income exceeds $150,000 and your filing
status is married filing jointly).
But
if you act now, you'll still have time to get on track with your withholding and
avoid any unforeseen tax surprises next year. You should pay particular attention
to your withholding if you received a big refund check this year or if you had
to make a significant tax payment with last year's tax return.
Also,
check your withholding if you had a significant change in your life this year,
like marriage, divorce, birth or adoption of a child, purchase or sale of a home,
or retirement. There is a good chance you're not having enough withheld if you
have more than one job, your spouse works, you have income not subject to withholding,
such as rent, dividends, interest or capital gains, or you owe other taxes like
self-employment or household employment taxes.
You
can adjust the amount withheld from your paycheck by giving your employer a new
Form W-4, Employee's Withholding Allowance Certificate. Or, you may need to pay
estimated taxes using Form 1040-ES, Estimated Tax for Individuals.
Need
help in figuring out whether you are withholding enough? Look at Publication 919,
How Do I Adjust My Tax Withholding? Or check out the Withholding Calculator at:
http://www.irs.gov/individuals/article/0,,id=96196,00.html
With
the help of current pay stubs and a copy of last year's tax return, you can check
to see if you are withholding the right amount. You can use the calculator results
to fill out a new Form W-4. If you have a complex tax situation or would like further information regarding this topic or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.
