Checking Tax Withholding

• In general, you want taxes withheld from your pay to be about the same as your tax liability. When not enough taxes are withheld, you have to pay the remaining tax when you file your return. When too much is withheld, you have to wait until you file your return to get the money back.
  
  Changes in your personal life, your financial circumstances or in the tax law itself may change how much you pay in taxes. Getting married or divorced, getting a second job or having unusual medical expenses are examples of changes that may affect your taxes. You can keep up with tax law changes at the IRS website (see Resources below) in its current publication on tax changes.
  
  Check your withholding any time one of these changes occurs. You should also check withholding if you owe a large amount or get a large refund when you file your taxes. You can use the IRS Withholding Calculator (see Resources below) or the worksheet in IRS Publication 919 to check tax withholding. You must complete a new W-4 within 10 days of any event that reduces the number of allowances you can claim or changes your filing status to single.
  
  

Increasing Your Withholding

• You may need to increase your withholding taxes if you have more than one job, you and your spouse both work, you have income, like rental income or capital gains, that is not subject to withholding or you owe taxes in addition to income tax.
  
  One way to increase your withholding is to decrease the number of "allowances" that you claim on Form W-4. Allowances refer to factors that affect your tax liability, like the number of your dependents. When you decrease the number of allowances, your employer will withhold more in taxes.
  
  Alternatively, you can enter an additional withholding amount on the W-4. Use the worksheet on the back of the W-4 form to calculate the correct amount. If you use this option, do not change the number of allowances that you claim.
  
  

Decreasing Your Withholding

• If you regularly get a large tax refund, you may want to decrease the amount of withholding to make your earnings available to you immediately.
  
  If you have additional taxes withheld based on an amount entered on the W-4, the easiest way to decrease withholding is to reduce this amount. Use the worksheet on the back to recalculate the additional withholding amount. The second way to decrease your withholding is to increase the number of allowances claimed on the form. You can claim only allowances to which you are entitled, so complete the worksheets on the back of the form to find out how many you may enter.