Adjustments to income tax withholding can impact payday, tax day
October 28, 2012 · Updated 8:03 PM
The passing of the 2012 federal tax filing extension deadline on October 15 means that now is a good time to start looking ahead to the 2013 tax filing season. Many working taxpayers may benefit from a review of their federal income tax withholding rate, according to the Internal Revenue Service.
“It's not too late to adjust your 2012 tax withholding to avoid big tax refunds or tax bills when you file your tax return next year,” said IRS spokesman David Tucker II. “Act soon, though, to adjust your tax withholding to bring the taxes you pay throughout the year closer to what you actually owe.”
Each year, millions of American workers have far more taxes withheld from their pay than is required, resulting in large refunds. They must wait for their tax return and refund to process before they can access their money. Tying major financial decisions to the receipt of their refund can be stressful – this is especially true for taxpayers who depend on their refund to arrive by a certain date. Others wind up owing money on tax day. They may experience stress from having to add an unanticipated federal tax bill into their budget.
“By reviewing and adjusting your withholding rate, you are less likely to have to write out a big check in April to pay taxes due. That’s if your withholding is less than it should be. Or, if your withholding rate is too high, adjust it to put more money in your paycheck now. The timing couldn’t be much better for those who are looking ahead to holiday gift-giving season, cold weather heating bills, and end-of-year charitable donations,” Tucker said.
Workers can generally submit a new Form W–4 anytime they wish to change the number of their withholding allowances. However, if a life event results in the need to decrease withholding allowances or changes marital status from married to single; workers must give their employers a new Form W-4 within 10 days of that life event.
Many workers can use the IRS Withholding Calculator on the IRS website, www.IRS.gov, to help them review their withholding information. Results from the calculator can help them fill out the W-4 form. IRS Publication 505, Tax Withholding and Estimated Tax, has information for employees and self-employed individuals, and also explains the rules in more detail. The forms and publication are available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).