Let’s start with the basics, like what is a W-4?
A W-4 is a Federal forms that tells your employer how much federal tax to with-hold. You can adjust your with-holding by changing your filing status and the number of dependents that you claim. Unlike your tax return where you must use the correct status and number of dependents, the W-4 game is won when you match your federal with-holdings to your federal tax liability. With-hold too much, and you are giving the federal government an interest free loan. With-hold too little and you will owe and may even have interest and penalties.
Making Work Pay and Making it Complex
But there is another complexity- the Making Work Pay credit. In April 2009, your employer was told to automatically lower your with-holdings to reflect the new credit. As of January 1 2010, your with-holdings went back to the regular rate, so your paycheck got a little smaller than it was in December 2009.
Making With-holding Easy
So you want to make an adjustment, but aren’t sure how to do it? Well, I’ve got a simple solution. Use the W-4 calculator.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.