How Much Should You Withhold?
Having a child brings a lot of joy to a family and a tax deduction, too. Not only can you claim your new baby as a dependent, but you may also qualify for other child tax credits that can dramatically reduce your year-end tax bill. Lower taxes may mean a bigger refund, but what if you would prefer to see more money in your paycheck instead?
The Internal Revenue Service provides a handy withholding calculator on its website, www.irs.gov. You’ll need some basic information, but most can be found on a recent pay stub. Then plug in some estimates about expenses and the calculator will determine how many allowances you may want claim on your W-4 form. (Remember, you can fill out a new W-4 form whenever you like.) If you want to receive a larger paycheck or, on the flip side, receive a larger tax refund adjust your allowances accordingly. Once it’s tax time, it’s too late for the current year, at least.