If you’ve already filed your 2022 taxes, maybe you weren’t happy with the results. Maybe too much, or too little, was withheld from your paycheck. The solution is to fill out a new W-4 form with your employer. Now, a lot of folks would rather have a cavity filled, but the process is easier than you think. Rob West takes you through it today. This is Faith and Finance - biblical wisdom for your financial decisions.
- As followers of Christ, we are to pay what we fairly owe in taxes. Jesus Himself said in Matthew 22:21, “Render to Caesar the things that are Caesar's, and to God the things that are God's.”
- So we must pay our taxes, but we also don’t want to overpay. That means having enough withheld from your paycheck to avoid getting hit with a penalty. It also means not having too much withheld. Both are forms of overpayment.
- The W-4 form determines how much the IRS will withhold from your paycheck and will affect the amount of your refund, if any. Ideally, you want to come close to having only what you’ll owe in taxes withheld.
- You don’t want a big refund, because that’s essentially an interest free loan to Uncle Sam, and as I said, it’s a type of overpayment because you’re denied use of that money. And again, if too little is withheld, you’ll pay a penalty.
- When filling out the form, you’ll need to account for all jobs, for you and your spouse (if you’re married), plus any additional income, credits and deductions available to you. You can download a blank W-4 form at IRS.gov.
- Enter your personal information, including name, address, social security number, and tax filing status. You can choose from single, married filing separately, married filing jointly, qualifying widow(er), or head of household.
You can actually stop after this and let your employer fill out the rest with default levels, but that probably won’t give you as accurate a result as you’ll get by filling in the rest.
- List all of your income, for you and your spouse, including self-employment. Here you have 3 options:
You can use an online estimator (there’s one available at IRS.gov and many other places) This works best if you have income from self-employment, because it allows for those taxes (both halves of FICA) in addition to income taxes.
Or you can use the worksheet attached to the W-4 form. This, or the estimator are often preferred if you have multiple jobs and you’d rather not give your employer information about other income.
Or, you can just check the box to have your employer withhold at the default rate. That seems easy, but it may result in too much taken out of your checks and a big refund check (again, you don’t want that).
So, you probably want to go with the online estimator or the worksheet to get the best results. Remember, the whole idea is to maximize your paycheck amount while still covering your tax liability for the year.
- Now you want to claim your children and other dependents. Make sure that only one spouse claims child-related tax credits on the W-4, and those credits should be claimed by the spouse with the greater income, otherwise too little will be withheld.
After you complete this step, your employer should know exactly how much to decrease your withholding to allow for your children, other dependents, and any other tax credits.
- Here you list any other items that will affect your withholding, such as income (apart from your job) that you expect to receive that won’t have withholding. Listing this will increase your withholding.
Also deductions, other than the standard deduction that you expect to claim (these would lower your withholding), and finally, extra withholding. You can specify how much extra you’d like withheld, for any reason. But again, don’t go overboard.
Just as with child tax credits, in Step 4, only one spouse should claim additional income and deductions.
- You’ve done the hard part. Now all you have to do is sign and date your new W-4 form and hand it in to your employer.
Next, Rob answers these questions at 800-525-7000 or via email at askrob@FaithFi.com:
- Do you need to pay taxes and how do you tithe on rental income for a condo that you purchased for your daughter to live in while she was attending school but she has now graduated?
- Does your former spouse receive a portion of your Social Security benefit if you divorced a couple of years ago?
- Is true that your retirement advisor is earning about 2% of fees of your assets under management if an insurance-licensed advisor hosting a free dinner you attended made that claim?
- Do you need to hire a probate attorney to assist you with proceeds of a class action lawsuit you inherited after your husband passed away without a will?
- Should you make additional payments on your mortgage with a $50,000 balance that you refinanced with some cash out for a new roof at a low rate, if you and your wife are retired and have very little left over at the end of the month?
Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and even download the free FaithFi app.