How to Affect Your Withholding Taxes

The subject of withholding taxes is not usually popular, among employees. Many feel like their paychecks have been greatly reduced by the time they see them. There are steps that you can take to alter the amount of withholding that is taken out of your paycheck. Here are a few things to consider about changing your withholding.

Withholding Basics

The amount of money that is taken out of your paycheck each pay period before it gets to you is referred to as withholding. Each employee will have a percentage of their paycheck withheld for state and Federal taxes. They will also deduct money for Social Security and Medicare as well. If you have any money for health insurance or retirement plans withheld, it may seem like your check is much to small for the amount of money that you make. If this is the case, there is something that you can do about it. 

The money that is withheld for Federal and state taxes can be changed based upon the number of allowances that you claim. If you get a large tax refund every year, this means that they are withholding more money than they need to from your check. If you would rather have that money spread out over your paycheck, you can decrease the amount of withholding from each check. Before you do this, you should understand that this will result in a decreased or non-existent tax refund at the end of the year. You might even end up owing money depending on several different factors. However, if you decide that you do want to change your withholding, here are the steps that you need to take.

Changing Withholding

Your W-4 form is the one that you will need to alter in order to change your withholding allowances. By adding to the number of allowances on your form, you will decrease the amount of withholding. This will, in turn, increase your take-home pay each pay period. Your employer should have a W-4 form that you can use. You are free to increase the number of allowances on your W-4. Many people believe that this number has to coincide with the number of dependents that you have on your year-end tax return. However, this is not true. They are two completely different numbers. 

Go to line 5 of the W-4 and you can enter in a new number of withholdings. Once you have made the necessary changes, sign it and give it to your employer. They will make the necessary changes for future pay periods. 

Increasing Withholding

If you want to increase your withholding, you can do this as well. This can be done by decreasing the amount of withholdings that you put on your W-4 form. In addition, there is another place on the W-4 form that allows you to contribute a certain amount that you want withheld. If you put anything in this blank, your employer will deduct that amount from your paycheck and give it to the government.