Volume 8 Issue 2008

If you are like most taxpayers, you probably prefer to get a refund — as opposed to having to write a check to the U.S. Treasury — at income-tax filing time. However, getting a large refund is not necessarily good for your ongoing cash flow. You would be better served having use of that money throughout the year instead of providing the government with an interest-free loan. On the other hand, you may be liable for an underpayment penalty if you don’t have enough taxes taken from your pay.

You can change the amount of federal income tax your employer is withholding by modifying the number of allowances you claim on Form W-4. There is an inverse relationship between the amount withheld and the number of allowances claimed. An increase in the number of allowances will result in a decrease in the amount withheld. Conversely, to increase the amount of tax withheld, decrease the number of allowances.

We can help you determine if you are on track with your 2008 withholding and what changes, if any, you should make before year-end.

Need help filling out your W-4?  Use this calculator.