Should i change my tax withholdings

Getting a divorce can take you back to single or head of household status and reverse many tax benefits. If you fail to account for these events on your W-4, your withholdings could be inaccurate. A new baby is more than a bundle of joy.

It's can be a major tax event, too. For tax year , the Child Tax Credit has changed to provide help for families financially struggling due to the pandemic. In addition, the entire credit is fully refundable for This means that eligible families can get it, even if they owe no federal income tax. Part of this expansion is to advance the tax credit to families by sending them direct payments during rather than having them wait until they prepare their taxes in Most families do not need to do anything to get their advance payment.

Normally, the IRS will calculate the payment amount based on your tax return. Eligible families will receive advance payments, either by direct deposit or check. The amount that you receive will be reconciled to the amount that you are eligible for when you prepare your Most families will receive about one-half of their tax credit through the advance payments.

If you receive too little, you will be due an additional amount on your tax return. In the unlikely event that you receive too much, you might have to pay the excess back, depending on your income level. For updates and more information, please visit our Child Tax Credit blog post.

If you are eligible for the Child Tax Credit, you can include the amount that you will qualify for in your W-4 calculations. Just remember that any amount that you receive as an advance payment during the year will need to be subtracted from the credit that you expect to receive on your tax return since you would have already this money.

If you adopt a child , there's potentially another tax credit. Any of these could allow you to reduce your withholding to account for the added tax benefits. In the past, you typically filed a new form when you started a new job or you wanted to adjust W-4 withholdings based on your tax situation. However, the IRS replaced this format with a new system beginning in It's easy to adjust your withholding. You can do it on paper or electronically. The old-fashioned way is to walk through the worksheets on the W-4 form.

An even easier way is to use the TurboTax W-4 Calculator. This simple tool makes determining your withholdings easy. Just answer the questions and the withholding amount is computed for you. You can adjust your W-4 at any time during the year. Just remember, adjustments made later in the year will have less impact on your taxes for that year.

Remember, with TurboTax , we'll ask you simple questions about your life and help you fill out all the right tax forms. These are all good reasons to review your paycheck withholdings to make sure enough is being paid to the government.

They also can alter your tax liability. If you want a larger refund next year, you need to adjust your withholdings so that more tax is taken out of each of your bi-weekly or monthly paychecks. Your refund is equal to how much you overpay the government in tax during the year.

If your income is lower than it used to be — perhaps from the economic fallout from the coronavirus pandemic — changing your withholdings could be one way to increase your monthly cash flow. You can opt to send less tax per paycheck to the federal government and pocket it yourself, helping you with bills and other financial obligations. The downside is that you will get a smaller or none at all next year at tax time. If you lost your job and are now receiving unemployment benefits, make sure your taxes are withheld from each check.

Unemployment insurance is a joint state-federal program and those who get it must pay federal and state taxes on it because those benefits are considered income by the Internal Revenue Service IRS. If you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming, you will only have to pay federal tax because those states have no personal income tax. The tool allows you to choose what refund amount you want to receive next year — if any — and will calculate how much to withhold to achieve that goal.

Use the results to change your paycheck withholdings. Learn when adjusting your withholdings is the right move for you. Let's say you take on a second job or side gig to earn some extra money this year.

This is an excellent time to adjust your withholdings. That's because a second job will likely increase your income, which will then increase the amount you'll owe in taxes. To offset this, you can increase your exemptions. Generally, if you are single you should continue to claim one on your W This number ensures that they withhold enough so that you do not owe at the end of the year.

But keep in mind that this can vary depending on your individual situation. If your spouse is working, then calculate your exemptions based on your combined income, especially if your spouse makes significantly more than you. You should also double check your withholdings when you get a raise. There is nothing as disappointing as having to fork out money to the IRS at the beginning of the year.

So if you find yourself with a hefty bill come April, it may be time to adjust your withholdings. If you're still not sure how many exemptions you should claim or the correct amount of withholdings you should claim consider using the IRS Paycheck Checkup tool.

You can adjust your withholdings so that the correct amount is withheld. You can even request that extra money be withheld each pay period.

This will save you the hassle of coming up with extra money at the end of the year to pay to the IRS. If you received a large refund last year, you should also adjust your withholdings and claim fewer exemptions, since this means you had too much in taxes withheld from your earnings.

Many people mistakenly look at the refund as an easy way to save money. But you are essentially loaning the money to the government and not receiving any interest on it every year if you overpay on your taxes. Instead, have your extra funds automatically transferred to a savings account, a CD, or even a high-yield savings account.