Common Tax Mistakes, Not updating your Form W-4

The purpose of the form W-4 as stated on the IRS instructions is so your employer can withhold the correct federal income tax from your pay.  What many people forget is that you should review and possibly update this when you get a promotion or have a life changing event such as a birth, death, marriage or divorce.

All of these things can affect how much money you should be withholding from your paycheck to avoid a nasty surprise at the end of the year.  Also be sure to review your state withholdings.  Your state may take out taxes as a percentage of the federal withholding.  If it is a percentage, you may want to increase it or decrease it to balance changes you made to the federal.

You can download the W-4 here:
http://www.irs.gov/pub/irs-pdf/fw4.pdf

Your HR department website may also have a link for you.  I would check there first for the state form.

There are many paycheck calculators out there to help you with this, including these:
http://www.irs.gov/individuals/article/0,,id=96196,00.html

http://www.paycheckcity.com/w4/w4instruction.asp

We have one on our site with some other calculators as well on our Tax Tips site:
http://turbotax.intuit.com/tax_help/index.jhtml

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