Need Some Quick Cash?
If youre looking to boost your income this month, weve got just the thing for you.
What Are Tax Withholdings?
Tax withholdings are the wages your employer sets aside to pay federal and state income taxes.
In short, its money you earn that you never see because its funneled directly into Uncle Sams hands.
How Are Tax Withholdings Calculated?
Your employer calculates your tax withholdings based on your responses to the W-4 form.
The W-4 form was redesigned in 2020 to help people more accurately calculate their federal income tax withholdings.
If you havent updated your W-4 recently, heres how the W-4 has changed.
The new design is divided into five parts, designed for accuracy and ease of use.
Ready to find out how some folks effortlessly earn the big bucks?
Millions of Americans ignorethese easy tipsthat could have you padding your wallet in no time.
From there, employers can calculate withholdings through the percentage method or the wage bracket method.
The downside is that the bracket method is manual and only covers incomes less than $100,000.
The percentage method is based on the tax rates as shown in the table below.
Meaning, you may be in a lower tax bracket than you were in previous years.
This withholding would be divided up across your paychecks for the year.
(Probably not for them, either, though.)
Here are three scenarios in which youll want to adjust your tax withholdings.
Having a childincreases your number of dependents by one.
We know youre busy, but have a go at find time to file a new W-4.
Getting marriedcan change your filing status, particularly if you plan on filing your taxes jointly.
Depending on your new spouses income, your overall household tax rate may increase or decrease.
The same goes for if you get divorced.
Buying a housecan reduce your overall tax liability since most mortgage interest and property taxes are deductible.
Need a cheat sheet?
Have we mentioned that the IRS provides a handytax withholding calculator tool?
The calculator can tell you whether your forms need an adjustment.
We get it.Everythingis more expensive than it used to be, but your paycheck hasnt kept up.
When money is tight,these resourceswill help nearly everyone.
Contact your companys HR department (or whoevers in charge of tax documents and compliance) for specific instructions.
And if your adjustments do mean you get to keep more of your paycheck, dont just blow it!
Use it tostart an emergency fund, or stick it in an interest-accruingretirement accountfor later.
Reporting from former contributor Jamie Cattanach is included in this report.
