In the present climate of growing anger amongst a great many people over their tax returns, it is important to understand the complexity of the tax process and the need for taxpayers to take a more proactive role with regards to their finances. If you are employed, then it is important for you to know how to fill out a w4. It is equally important for you to know the ramifications of how you filled out your w4 on your weekly paycheck and yearly tax returns. There are a number of factors to consider.
Don’t Ignore The Politics
Politics can be confusing and frustrating, but it is important to not tune it out because it can affect your finances. This past year saw what was billed as a tax cut for the working class. Many people, however, are now discovering that their tax returns are smaller than last year or they have to pay. How can this be? The answer is that their withholdings were lowered. This resulted in a small increase in take-home pay. Many didn’t even notice it. These weekly increases in take-home pay dramatically affected the year-end return. If would have done what’s discussed in the next section, then they would have known.
Check So You Know
The sly move to increase peoples take home pay before the mid-term elections would have been noticed if people routinely checked their w4. A w4 lets employers know how much tax to withhold from a paycheck. Although it’s required at the start of employment, employees can request to see and make changes to this tax document throughout the year. A routine check would have revealed the changes that were made and employees could have made their own adjusts or, at the very least, would have been forewarned that their tax return would be different.
Decide What You Want
It is very important to know what you want when filling out your w4. Don’t you want bigger take-home pay from your paychecks or do you want the big tax return at the end of the year? Most times you can’t have both and the one that you do receive is directly related to how your w4 is filled out. Consider carefully before making a decision on which is best for your fiscal situation. Also know that, if you need to, you can alter your tax withholding on your w4 at any time during the year to have fewer taxes taken out. You may need to do so because you’re in a tough financial stretch. Once passed you can return to your standard withholdings. Just remember that this will reflect on your year-end return and that you’ll have to pay the difference then.
When it comes to your money, taxes, and financial stability, you always want to be a proactive participant in the process. That means staying aware of things that can affect your finances regardless of how far removed from you they are. If you are blindly trusting the process, then you could lose big in the end. You never want to be blindsided, so, as a rule, you may want to revisit your w4 quarterly to examine it for any changes.
