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For many of us, we haven't looked at, examined or reviewed the elections we made on our original W-4 form. With the year-end getting close, here are some things to consider.
- Are you having too much withheld? A lot of taxpayers withhold more income tax from their earnings than they are required to, in order to have a larger refund when they file their taxes. The refund is considered by them as an annual bonus, however, in actuality, you have given an interest-free loan to the IRS. You should consider reducing your withholdings and set aside this excess withholdings in a separate bank account. This will allow you immediate access to the money as well as the potential to earn some interest.
- Have you gotten married late in the year or are you getting married in the next year? Many times, newly married couples adjust their W-4 to change their status from Single to Married. However, before you automatically make the change to "Married," consider the all the options. If both you and your spouse work, be sure to mark the option "Married, but withhold at Single rate." If only one of you will be working, then mark "Married." When you mark "Married," it is assumed when you file your taxes, you will be utilizing your spouse's tax bracket, therefore, less money is withheld. If you have marked "Married" and both of you work, there is a chance you may owe the IRS when you file your tax return instead of receiving you normal refund.
The items listed above are some of the most common things to consider. If you have any questions, feel free to contact any one of us here at Rea & Associates, Inc.
-By Chris Ricker, CPA (Lima office)
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We take great care in the preparation of our articles and announcements. We also have a process of reviewing articles when major changes take place. The business, legal and tax climate is constantly changing especially when reviewed on an industry basis.
It may be very important to consult with us or your Investment Advisor before implementing ideas contained in articles and announcements. Many ideas have complexities and nuances that cannot be adequately detailed in the articles or announcements. We are not responsible for errors, misinterpretations or omissions related to these articles or announcements. Nor are we responsible for the applicability to your personal, business or tax situation.
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