W-4 Tax Withholding Information

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Employers use W-4 forms to determine how much tax to withhold from your paycheck each pay period. You file a new W-4 when you begin a new job. You may also file a new W-4 each year if you request to do so. If you get married, divorced or have children during the year, filing a new W-4 is often a good idea to maximize your withholding allowances.

Purpose

Whenever you begin a new job, you must fill out a W-4 form to claim withholding allowances. Your claimed allowances tell your employer how much of your paycheck to withhold for payroll taxes. In April, you may get a refund if your withholdings exceed your tax liability for the year. However, if your withholdings are less than 90 percent of the taxes you owe for the year, you must pay a penalty.

Considerations

If you get a large refund each April, you may consider reducing your withholdings by filling out a new W-4. You can then get more of your money throughout the year rather than getting it in a lump sum in April. In addition, you may be able to save or invest the extra money you get through reduced withholdings. Your withholdings should cover slightly more than 90 percent of your tax liability so that you do not pay penalties and do not pay an excessive amount throughout the year.

Withholding Options

On your W-4 form, you may claim an allowance for yourself, your spouse and your dependent children. If you are filing as the head of household or have child care expenses, you may also claim withholding allowances. If you and your spouse file taxes jointly, you may split your withholding allowances any way you want. The more allowances you claim, the less tax that is withheld from your paychecks. You may claim fewer allowances than you are entitled to if you wish.

Exemptions

If you had little or no tax liability during the prior year and expect not to have any tax liability this year, you may claim exemption from withholding and keep your entire paycheck each pay period. You may not claim an exemption from withholding if you make more than $950 in a year and must refile your W-4 each year to reclaim withholding exemption.

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