FML partner Andrea Harrington was recently quoted by The Wall Street Journal in an article about people adjusting their W-4 to boost the amount of take-home pay. With more than 25 years of experience, Andrea is well-versed in all aspects of the tax code. The W-4 is a form that is familiar to most of the general population, but it sometimes misunderstood.
The W-4 determines the withholdings from each paycheck and computes the amount to deduct to pay an individual’s federal income tax. The form can be adjusted to allow for more money to be withheld to lessen the burden — or increase the refund — at tax time, or less can be withheld if a higher take-home amount is necessary.
Andrea is quoted in the first section of the article, under the subhead “What is a W-4?” Here is the excerpt:
Internal Revenue Service Form W-4: Employee’s Withholding Certificate, tells your employer how much of your pay to withhold for income taxes. Your withholding amount reflects answers to a number of questions about your filing status: how many jobs you have, if your spouse works, if you have any dependents, whether you expect tax credits and additional withholdings or if there are deductions you anticipate taking on your current year’s tax return (which you’ll file the next year).
If the thought of revising your W-4 and re-answering all those questions gives you the shivers, it’s understandable, says Andrea Harrington, a certified public accountant with FML CPAs in Glastonbury, Conn.
“It’s a terrifying form—kind of a math puzzle,” says Harrington. To keep stress levels down and your withholdings dialed in, she suggests an annual approach to W-4 adjustments. “Just think about it once per year, as part of your broader financial checkup.”
The rest of the article goes on to talk about five reasons one would adjust their W-4. The first is if they receive a large tax refund. This means an individual was giving the federal government an interest-free loan.
The other reasons include having eligibility for substantial tax credits (installed solar, bought an EV, etc.); the purchase of a home; if an individual is already square with the federal government; and if there were changes made to the tax code.
Read the full article from The Wall Street Journal.
