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The <\/span>Form W-4, Employee\u2019s Withholding Certificate<\/span><\/a> indicates how much federal tax to withhold from your income. If you received a surprise at tax time this year, it may be because your W-4 isn\u2019t set up correctly. It\u2019s important to keep your W-4 up to date so that it reflects your current needs and life situation.<\/span>\u00a0<\/span><\/p>\n Having incorrect withholding can cause unwanted consequences. If too little in federal taxes is withheld, you will generally owe tax when you file your tax return and may even incur a penalty. If too much is withheld, you will generally be due a refund. Money that is refunded to you could have been invested or saved in an interest-bearing account rather than held by the government.<\/span>\u00a0<\/span><\/p>\n When Should a W-4 Be Updated?<\/span><\/b>\u00a0<\/span><\/p>\n It\u2019s good practice to update your W-4 whenever your personal or financial situation changes. Examples of life changes that may warrant a new W-4 include:<\/span>\u00a0<\/span><\/p>\n You also may wish to revisit your W-4 if it\u2019s been a while since you\u2019ve looked at it or if tax laws have changed in a way that might affect you.<\/span>\u00a0<\/span><\/p>\n Mid-year <\/span>is often a good time<\/span><\/a> for business owners to assess the balance between the optimal level of compensation and taxes paid throughout the year. Ideally, you want to pay \u2018not-too-much\u2019 but \u2018not-too-little\u2019 to avoid big surprises or penalties at year-end.<\/span>\u00a0<\/span><\/p>\n How to Complete the W-4<\/span><\/b>\u00a0<\/span><\/p>\n Taxpayers can use the <\/span>IRS\u2019s Tax Withholding Estimator<\/span><\/a> to see how various withholding strategies affect their refunds, take-home pay, or tax due.<\/span>\u00a0<\/span><\/p>\n The W-4 has five steps:<\/span>\u00a0<\/span><\/p>\n If you only complete Steps 1 and 5, your withholding will be based on the standard deduction and tax rates, with no other adjustments. If you want to calculate more accurate withholding, you will want to complete Steps 2 through 4. Making <\/span>maximum use of deductions<\/span><\/a> is one way to avoid having your business overpay taxes.<\/span>\u00a0<\/span><\/p>\n Claiming Exemption from Withholding<\/span><\/b>\u00a0<\/span><\/p>\n To claim exemption from withholding and have zero federal income tax withheld, you must have a current Form W-4 on file that indicates zero withholding. This W-4 is only valid for one calendar year. To continue to qualify as exempt, you must resubmit a W-4 annually, have incurred no tax liability for the previous year, and have no expected tax liability for the current year.<\/span>\u00a0<\/span><\/p>\n At S.J. Gorowitz Accounting & Tax Services, our goal is to help you keep as much of your hard earned money as possible through a well-planned <\/span>tax strategy<\/span><\/a>. We can provide expert counsel on how to maximize your benefits, minimize your liabilities, and keep more of your earnings over the long term. Call us at 770.740.0797 or email us at <\/span>info2@SJGorowitz.com<\/span><\/a> to set up a tax consultation today.<\/span>\u00a0<\/span><\/p>\n<\/div>\n\n
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