To Owe or Not to Owe the IRS
Everyone likes spending their tax return refund, but could your refund be costing you money?
Take a minute to answer these questions:
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Did you owe the IRS money this year?
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Did you get back less than you expected?
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Would you like to get a refund or at least break even next year?
If you are unsatisfied with any of these answers, you may want to adjust the amount of income tax withheld from your regular pay.
The amount of money withheld from your regular pay depends on two things: the amount of money you earn, and the information you give your employer on Form W-4, Employee's Withholding Allowance Certificate.
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The W-4 form includes three types of information that your employer will use to determine how much to withhold:​
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Whether to use the higher single (S) rate or the lower married (M) rate,
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How many withholding allowances you claim (keep in mind, each allowance reduces the amount withheld),
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Whether you want an additional amount withheld.
NOTE:
An important distinction needs to be made here. Your withholding allowances may differ from the number of exemptions or dependents that you may claim on your income tax return.
This confusion has caused a lot of taxpayers to discover they do not have enough Federal income taxes withheld from their paychecks.
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To change your withholding allowance:
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Determine your present withholding status. (For example, Single rate with 1 allowance and no additional amount withheld)
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Decide if you want more or less Federal income taxes withheld.
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Give your employer a new Form W-4 to change your withholding status or allowances.
Helpful Hint:
Most taxpayers that only report wages on a W-2 without itemizing, will will owe little or no money if they claim only one allowance.
To maximize your refund, claim no allowances and withhold at the higher single rate even if you are married.
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