If you work and earn money, you’re supposed to pay taxes on that income. The IRS issues the form W-4 for the purposes of determining how much taxes you owe. Your employer deducts taxes from your paycheck based on the number of allowances you claim on the W-4. For the most part, if you are a single person working a single job you’ll just be taking the standard deduction. But what happens if you get married, or get a second job? These conditions may change your tax status and if you’re not careful you may end up paying too little or too much taxes.
If you overpay on your taxes you’re giving the government free money that they can accrue interest on, that money should benefit you, not the government. If you underpay your taxes you may be in line for an unexpected tax bill or even a penalty for underpayment.
There are several conditions under which you may need to change your W-4.
- If you get a second job. With a second job comes more income so your tax liability will go up too. Your W-4 will need to be adjusted for the extra income.
- IF your spouse gets a second job or changes jobs it could put you into a different tax bracket
- If you get laid off and are unemployed part of the year you may have had too much tax withheld, so you’ll want to adjust for that
- Getting married or divorced will change your tax rate, especially if both spouses work. Getting married may increase your income while getting divorced may decrease your income
- A new baby will come along with tax implications. Having a child will change your dependent allowance
Changing your W-4 should be a simple process and there are instructions on the IRS website. If you’re not sure or feel it’s just too complicated, talk to a tax professional.