Guest post by Jenae F. Thomas, CPA, Hawkins Cloward & Simister
Have you ever been preparing your tax return, expecting to get a refund, only to find you and your spouse owe taxes instead? It can be shocking, disheartening and downright confusing when you were expecting a refund.
The answer lies in the W-4 worksheet you filled out your first day on the job. The W-4 tables assume there is only one worker in the family and that you work at the same job for the entire year. These two assumptions are often wrong and result in an incorrect amount of federal and state withholding from your paycheck.
The IRS has a calculator that can help determine the correct amount that should be withheld. However, this calculator assumes that you know a lot about taxes–and most of us have a hard enough time preparing a tax return in April.
Be alert for the following items that can cause problems with your withholding:
1. Life-changing events: A life-changing event should trigger a change to your W-4. Examples include a change in marital status, birth or adoption of a child, purchase of a new home, children no longer being claimed on your tax return or a change in jobs.
2. Number of wage earners: If there is more than one wage earner in your household, only one person should claim all of the possible allowances.
3. Multiple jobs: If you worked multiple jobs during the year, your withholding is probably too low. You might need to increase your withholding for the remainder of the year by choosing fewer allowances.
When in doubt, ask for help to prepare a tax projection to see exactly how much should be withheld from your paychecks before the end of the year. A certified public accountant (CPA) can quickly prepare this projection using your prior-year tax return, information about changes this year, and the most recent paystubs from all of your jobs. A tax projection takes the guesswork out of the amount of tax that will be due in April.
If changes should be made to your W-4 form, print one from the IRS website at www.irs.gov, change the number of allowances, and turn it in to the payroll staff at work. The employer must put the changes into effect by the first payroll of the month following the date they receive your form.
Jenae Thomas is a senior tax accountant at Hawkins Cloward & Simister, one of Utah’s largest independent accounting firms. She specializes in small business and individual tax return preparation.
This article should not be construed as tax advice from Bank of American Fork. Please seek tax advice from a qualified tax professional.