One of the first things you do when you start a new job is your employer will have you complete some paperwork. One of those forms you complete is called a W-4 form. This form tells your employer how much federal income tax to withhold from your paycheck based on the amount of wages paid. The purpose of this is to pay your taxes for the year with your paycheck each pay period instead of in one lump sum at the end of the year.

Sometimes you will receive a refund with your tax return because you have too much withheld or sometimes you will owe the IRS because you don’t have enough withheld. This can happen when your personal or financial situation changes during the year. These are the most common reasons to think about changing your W-4 form.

  • Total household income has increased – If you or your spouse receives an increase in wages, this could move you into a higher tax bracket and your tax liability could be higher than the previous year.
  • You started a side business or started a seasonal or part-time job – If you decide to start your own business this could increase your overall income on your return. Also if you have a seasonal or part-time job and receive a 1099 instead of a W-2. Generally, 1099’s don’t have any taxes withheld and the tax liability from that income will be owed with your tax return.
  • Family dynamic has changed – This can change your return when you get married, have children or get divorced. It can also even change based on the age of your children.
  • When tax laws change – The most recent tax law change was the 2018 Tax Cuts and Jobs Act. A number of things changed including the Child Tax Credit and tax brackets to name a few.

There are ways to adjust your withholding anytime during the year when you have changes in your personal and financial situation.

  • The IRS has a withholding calculator that will help you estimate how much should be withheld from your paycheck each pay period.
  • A new W-4 form can be completed during the year by asking your employer.
  • Estimated payments to the IRS can also be paid during the year.

Financial changes in your life can change your tax return and we are here to help make these changes less stressful every year.