You Control Your Paycheck

 In Tax News

With the recent tax changes many people have seen an increase in their after-tax pay.  This is due to the new tax rates and corresponding withholding schedules for employers.  However, you are always in control of your paycheck.

If you have had your job for a while you may not remember, but when you first started you completed a Form W-4 and likely the state equivalent form. The purpose of this form was to estimate certain factors that affect taxes so that your employer could withhold the proper amount of taxes to get you as close as possible to how much you will owe.  Of course, these are always just an estimate and can be off due to things such as other sources of income, partial year of work, or a spouse that earns a significantly different amount.  Nevertheless, through this form you always have control.  You can choose to have more withheld from each paycheck to increase a refund at year end, or you can choose to have less withheld and deal with the tax bill at tax time.  Keep in mind there could be penalties though if taxes are not paid evenly during the year.

Another complaint we hear often is also caused by this situation.  Many people will be upset or confused as to why their coworker gets a bigger refund than them, or why they always owe taxes.  It is likely because of different information on the Form W-4.  Perhaps your coworker gets a bigger refund, but then assuming you have the exact same situation you are likely getting a bigger paycheck each week.

In the end, if you are always getting a refund and would rather have more each week or are always owing money and would rather pay more each week, you should work with your tax professional to estimate your taxes and setup your Form W-4 to withhold the desired amount of taxes.

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