April 3, 2017 in Taxes

How and why to adjust your tax withholding

Payroll withholding is something every taxpayer needs to get just right. Why?

What’s wrong with getting a refund? You’ve given the IRS free use of your money, which you could have put to better use yourself throughout the year.

For example, you could earn interest in a high-yielding certificate of deposit. Compare CD rates at Bankrate.

The best course, tax experts say, is to adjust your withholding so your tax payments in our pay-as-you-earn tax system will match your actual tax liability.

How to get it right

To make any change, file a new form W-4 with your employer. This will change the amount that comes out of your paycheck.

If you owe the IRS:

If you regularly get a big refund:

Bankrate can help you find the best savings rates or CD rates.

Take a fresh look when things change

You should adjust your withholding any time there’s a major change in your life — such as if you marry, welcome a child into your family or buy a home. Each of these circumstances can affect the amount of tax you’ll owe.

The IRS offers an interactive withholding allowance calculator and a couple of work sheets on Form W-4 to help you figure out the changes to make to your withholding amount.

See how the number of allowances affects your take-home pay with Bankrate’s hourly paycheck calculator.