If you are like some taxpayers, you have adjusted your W4 to accommodate your cash flow for half the year and then you make sure the IRS is covered the other half of the year. And like many taxpayers, you dummy down your W4 for the first six months and then increase it for the last six months.
If you insist on doing this each year, there is one suggestion. Pay the IRS heavy through your payroll withholding for the first six months, and increase your take home pay for the last six months instead of the first. It is during the holidays, especially when families are involved, that taxpayers find that they need that extra cash.
Plus if something should happen during the last half of the year and you were not working during the 3rd and 4th quarter of the year, your debt to the IRS would more than likely be over paid. And the refund would come in handy.
Read below for the IRS's suggestions on adjusting Federal withholding to avoid big tax refunds or tax bills. If you need help with computing Self-Employment taxes, just complete the form to the right.
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The Internal Revenue Service reminds taxpayers that it's not too late to adjust their 2012 tax withholding to avoid big tax refunds or tax bills when they file their tax return next year.
Taxpayers should act soon to adjust their tax withholding to bring the taxes they must pay closer to what they actually owe and put more money in their pocket right now.
Most people have taxes withheld from each paycheck or pay taxes on a quarterly basis through estimated tax payments. Each year millions of American workers have far more taxes withheld from their pay than is required. Many people anxiously wait for their tax refunds to make major purchases or pay their financial obligations. The IRS encourages taxpayers not to tie major financial decisions to the receipt of their tax refund - especially if they need their tax refund to arrive by a certain date.
Here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return.
Employees
- New Job. When you start a new job your employer will ask you to complete Form W-4, Employee's Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete the Form W-4 accurately.
- Life Event. You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, getting or losing a job, and purchasing a home. Keep your Form W-4 up-to-date.
Self-Employed
- Form 1040-ES. If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time.
