If you have ever worked as an employee, you've probably filled out a Form W-4, which tells your employer how much money to take out of your paycheck for taxes. If you fill it out incorrectly, you end up having to pay additional taxes at the end of the year -- or inadvertently giving Uncle Sam an interest-free loan. If you want a tax refund, your employer will have to withhold more than you owe.
Determine your tax obligation for the year. Congress may make changes to the tax code, but you can come pretty close by filling out last year's federal income tax form using this year's estimated figures. Subtract the amount of any federal income tax that has already been withheld from your tax obligation. The remainder is how much additional money you need to have withheld from all sources by the end of the year. Divide that amount by the number of paychecks you still must receive to determine the tax you need withheld per paycheck. Compare that figure to the withholding on your last check. If the amount being withheld is less than you need, you'll need to adjust your withholding.
Ask your employer for a copy of your current Form W-4 and a new Form W-4, and use the information on your old Form W-4 as a reference to make adjustments on your new one. Enter your name, address and Social Security number on the new form. You can have additional money withheld in three different ways. You can change your marital status in Box 3 from Single to Married, or from Married to Married, but withhold at higher Single rate, or you can decrease the number of allowances you claim on Line 5. Since you already know how much additional taxes you need to have withheld, the simplest way to adjust your withholding is to tell your employer how much additional money you want withheld on Line 6. Sign and date your new Form W-4 and turn it in to your payroll department.
Check the amount of your tax withholding on your next several paychecks to determine that your changes were implemented. If you don't see the appropriate changes, contact your payroll department to ensure that they received your new Form W-4. If the changes you made were not sufficient, fill out another new form.
- Review your Form W-4 anytime you have a significant life change, such as a marriage, divorce, birth of a child, death of a dependent, a new job or a change of residence. There is no restriction on the number of times you can submit a new Form W-4. The instructions that accompany Form W-4 can be confusing, especially if you work more than one job. The IRS maintains an online withholding calculator that helps take the guesswork out of figuring your withholding.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.