Now that we are about 1/2 way through 2009, it’s time to adjust the withholding numbers on your paycheck, says Kiplinger.com Most of us pay the majority of our taxes due in the 1/2 half of the year, which means that if you leave your withholding at the same level for the second 1/2 of the year, you might be overpaying…and then you get a refund come 2010. Personally, I don’t like getting a refund, as it means just that – I lent my money to the government interest-free for at least 6 months! I always aim to either break even or owe a little bit come tax time, which is pretty easy for me to do because I am self-employed and I don’t have any W-4 forms to fill out for employers – I track all my own income and taxes paid. But for someone working for a company, you have to file a revised W-4 form with your employer that asks them to reduce your withholding for the rest of the year. The more allowances you claim on the form, the less taxes get taken out.
The key is to avoid underpaying your taxes, so you do have to be careful how many allowances you claim for the second half of the year. To figure out what you can claim, you can either check out this download from the IRS called “How Do I Adjust My Tax Withholding?”, or you can check the calculator that Kiplinger provides at their website, which asks you a few simple questions and helps you figure out how many allowances you can take for the rest of 2009.
It’s definitely worth a look to see if you can give yourself a mini raise for the second half of the year, especially in this economy. Just be sure you don’t underpay by too much, as then you have to come up with all the money you underpaid come next April 15th!