Think back to your first day on the job. TONS of paperwork, lots of new faces, plenty of nervousness.
Chances are, whomever was doing that paperwork with you was simply rolling right through it (or it was all on a computer and your were doing it all alone), and you dutifully signed here, and there, and acknowledged this, and initialed that.
It was a long day, and it simply flew by.
One of the forms you signed, most likely, was a W4. That’s the basic form that Uncle Sam and your employer use to determine how much is taken out of your paycheck for taxes and Social Security, and in my experience, most folks get it all wrong.
Even if you got it all right, it’s NEVER set in stone, and as your life evolves and changes, it’s a great idea to evaluate what withholding you’ve claimed and if you need to make changes.
Here’s some examples…
- You’ve gotten a second job. It might seem strange to think that a part-time job could put you into a different tax bracket, but if you file jointly, or you’re right on the cusp of a bracket, that little “extra” you earn could really impact your tax liability. Take a few minutes and do the math today to determine if you’ve set yourself up for a tax problem. The same holds true if your spouse got another (or a new) job. This is where talking about income and taxes now is far preferable to finding out next year when the tax bill comes due.
- Marriage or divorce impacts your withholding. Yes it does! Ask any newlywed and they’ll tell you, it’s amazing the difference a set of vows can make. This is why it can pay off big time to not only talk about it with your spouse, but to use this knowledge as part of your overall tax and savings plan for the year and for years to come.
- Having or adopting a baby. That little seduction can be a big deduction, and while it’s easy to ignore the facts about single-parent households, clearly defining who is claiming your bundle of joy years later – or even with respect to “married filing separately” or “head of household” scenario can help to save money with the right withholding boxes checked on a W4.
The point in all this is simple: there are a LOT of variables in the seemingly “simple” W4 you should consider, and when you set it up properly. Not doing so can cost you a lot in terms of what you take home each week, and what you’ll pay on April 15th.
If you’re not sure, then it’s worth a call with me or the team to ensure you’ve got things all sorted and are set up the right way.
Let us know how we can help!
All the best,