Time to check your tax withholding. Last tax season was a shocker to many tax payers; they owed the IRS for the first time. The tax withholding is not calculated by deductions anymore. The W-4 bases tax withholding based on filing status and has for a few years. The IRS and your employer expects you to change your form to reflect your filing status and consider any annual tax deductions, i.e., Child Tax Credit or Educations Credits that lower your tax liability.
Allowances are no longer used for for the W-4 form. This change was meant to simplify, and be more accurate. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Presently, you cannot claim personal exemptions or dependency exemptions due to changes in IRS tax laws.
You should consider completing a new Form W-4 each year, or whenever your personal or financial situation changes. Review your tax liability if you receive a raise, change jobs, or if your family household changes in size. You can change the information on your W-4 any time throughout the year,. I recommend taking time half way through the year to see if you are still on track. Update the Form W-4 as needed, to ensure your employer withholds the correct federal income tax from your salary. Not withholding enough taxes can lead to a penalty, and taking out too much for taxes can result in a penalty.
The links below provide more information on the W-4 Tax withholding form. There is a link to the IRS online Tax Estimator tool. It is a good idea to research tax laws annually. The IRS web site is a valuable resource. Plus, it is free to use.