Why it Pays to Review Your Tax Withholding

Tax Planning Young man working on his laptop

Do you remember that odd looking form you filled out when you got hired? The one with big, bold type at the top and lots of fine print? That W-4 form might just be the the most important tool when it comes to squaring yourself with the IRS.

It’s definitely worth more than the 5 minutes you probably spent filling it out on your first day.

What’s In a Refund?

I love getting a big, fat refund check from the IRS. Nothing feels better, right? But when you take a step back, the majority of the time you’ll find that you’re actually getting YOUR money back from the government.

Money that could have been in your pocket every time you got your paycheck. Money that could have been in a savings account, or a mutual fund, or an IRA – putting your money to work for you.

Instead, your money was stuck in Uncle Sam’s wallet all year long.

Why Revisit Your W-4?

Your W-4 helps your employer determine how much tax should be withheld from your pay check.  Things change in your life throughout the year. You might get married, divorced, have kids, or maybe your kids grow up and are no longer dependents. All of these things – and so much more – can affect your tax withholding.

It’s best to owe the IRS as little as possible, and for the IRS to owe you as little as possible. I know, I know, “What about my tax refund?” Remember, no refund means you didn’t give the government a loan each paycheck.

That’s why it’s important to review your W-4 on a yearly basis and give your payroll department any adjustments to your W-4 based on changes that can affect your taxes. Check out the TurboTax W-4 Withholding Calculator to help you figure out if you need to adjust your W-4. It gives you the help you need to make the decision between a larger refund, or a larger paycheck.

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