203 Adjusting the Withholding Tax
Withholding tax. Admit it. No one likes looking at their paycheck stub and seeing the amount of withholding tax, social security tax, medicare tax, and insurance that is taken out leaving you with the net amount on the check.
When it comes to tax returns, taxpayers fall into two categories. You either have a refund or you have an additional tax liability. It’s a balancing act between owing and refunds when it comes taxes.
When it comes to tax refunds for some reason, people enjoy seeing large tax refunds. However, if you were to adjust your dependents or changing your martial status on the W-4, you could receive your refund throughout the year as an increase to your paycheck. The government isn’t going to give you interest on this large overpayment unless they hold your refund because if an audit or another reason.
The only exception is that if you’re receiving a refund because of one of the refundable credits (Earned Income Credit, American Opportunity Credit). In this case, you still have to wait until the end of the year to file your tax return and receive the refund. You could still change (raise) the number of dependents.
Withholding tax is based your martial status, number of dependents you have listed, and any additional tax you have taken out on the Form W-4 that you give to your employer.
You should update your Form W-4 with your employer is you have a change in the number of dependents, change in martial status, an additional job, receiving self-employment income or other income in addition to your job where you are having withholding tax withheld.
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- CIRCULAR 230 DISCLOSURE "We are required by IRS Circular 230 to inform you that the advice contained herein (including all attachments) was not intended or written to be used for the purpose of avoiding any penalties that may be imposed under Federal tax law and cannot be used by you or any other taxpayer for the purpose of avoiding such penalties."
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