How to Change Your Withholding to Provide More Monthly Cash
If you get a big income tax refund each year, you can add cash to your paycheck by changing the number of withholding allowances you claim on your W-4 form.
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Instructions
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Use a W-4 Calculator (like the one at taxbrain.com/taxcenter/w4calculator.asp) to determine your withholding allowances.
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Understand that you can claim more withholding allowances if you want to. Withholding allowances have no relation to the number of dependents or exemptions you have or can claim on your income tax return.
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Ask your employer for a new W-4 (Employee's Withholding Allowance Certificate), or print one out from the IRS Web site.
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Increase your number of withholding allowances. This is done on line 5 of the W-4.
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Understand that less will be taken out of your check each pay period, so you'll get a smaller refund (or no refund) when you file your tax return.
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Sign the W-4 form and give a copy to your employer.
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Monitor your future paychecks to make sure the change has been made.
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Tips & Warnings
The higher the number of withholding allowances you claim, the less income tax will be withheld from each paycheck.
The standard withholding tables don't work when you have income from sources where no taxes are withheld, such as interest, dividends and capital gains. Nor do they work when you have more than one job during the year. Unless you itemize, limit your withholding allowances to zero or one; you might even need to have an additional amount withheld each paycheck to avoid owing income tax when you file.
Your number of withholding allowances can be different for federal taxes and state taxes.
Avoid increasing your withholding allowances by more than one or two. You don't want to pay too much income tax at the end of the year - or a penalty for underwithholding.
