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withholding

Who should do a mid-year tax checkup?

There are certain groups of people who really need to do a mid-year withholding checkup, according to this notice from the IRS.

Mid-year withholding checkup

It’s a good idea to do a withholding checkup early in the tax year to make sure that you’re having the proper amount of tax withheld from your paychecks.

Adjusting Withholding Saved 44% of the Tax Bill

Adjusting withholding on your income taxes can produce some surprising results. See how one taxpayer saved 44% in taxes by adjusting his withholding.

Starting a new job in the middle of the year? Use the part year withholding method to avoid excess tax withheld

When you file your W4 form with a new employer, this instructs the employer how much tax to withhold from your pay, based on a full year’s pay rate.  There is a strategy you can employ that will reduce the amount of tax withheld from your pay – known as the part year withholding method.  This method of tax withholding calculation takes into account that you are only working and earning for a part of the year, so your overall income will be less, and there would be less tax required. If you start working in the middle of the year (or worse, late in the year) the normal rate of withholding would result in significant over-payment of tax withheld.  The standard tables used to calculate withholding make the assumption on each pay that you are earning at this rate over the entire period.

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