As the year draws to a close, I want to bring your attention to an often-overlooked tax strategy that could significantly impact your financial standing: adjusting your W-4 withholding. Life doesn’t remain static, and neither should your tax strategy. Now, it’s no secret I mention this throughout the year, but too many times, I see clients making relatively “small” mistakes on their withholding that costs them BIG TIME.
Why the W-4 Matters
The W-4 form may seem like a mere formality when starting a new job, but its significance is enduring. This document controls how much federal income tax is withheld from your paycheck. The numbers can add up—either to your advantage or detriment.
Life Events and Your W-4
Marriage, divorce, the birth of a child—life’s major milestones have tax ramifications. If you’ve experienced any significant life changes, your existing W-4 may no longer be serving your best interests. An updated W-4 form can adjust for these changes and ensure you’re neither overpaying nor underpaying your taxes … and even a change late in the year – like the birth of a child – impacts your whole tax year.
So even though we’re up to our necks in the holiday season, take a few moments to review your W-4 settings. Our team can assist you in making adjustments that reflect your current situation.
The Risks of “Status Quo”
Sticking with an outdated W-4 can lead to unpleasant surprises. You might end up giving the government an interest-free loan or, worse, finding yourself slapped with a tax bill you hadn’t budgeted for. The act of reviewing and updating your W-4 is relatively straightforward, especially with our guidance. You need to ensure the withholding aligns with your projected tax liability for the year, taking into account credits and deductions.
If you need help navigating these waters, don’t hesitate to reach out. We’re here to help you get your ducks, and your dollars, in a row. The point is, your W-4 is more than a one-time form; it’s a living document that should evolve with your life circumstances. As the year ends, now is the ideal time for a review and potential recalibration. It’s a straightforward step that could save you significant sums and spare you future headaches.
All the best,
Sincerely,
