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Withholding Taxes

Every month as you draw your paycheck, a certain amount is withheld to be given to the government. This is a part of your income paid out as you earn it. Adjustments are made at the end of the year. You might have to pay more or you may get a refund. The form for withholding taxes is given to you by your employer. You specify the allowances you would like to claim on that form. Based on that, the employer calculates the amount of tax to withhold. Your allowances are for you, your family members, mortgage and other specifications in a worksheet. You can submit a new form in case you want to change the amount withheld.

The withholding is reduced by itemizing deductions. You have to be sure that you are withholding the right amount. If your spouse is working you might need to submit another worksheet.

If you withhold an amount that is way too low, or do not withhold taxes on income you might have to pay penalties. To avoid these keep a track of your taxes paid and if you get additional income make sure you pay tax on that too. Watch out, if you give false information you could face criminal charges. You need to make sure that the withheld amount and tax payments are almost all your liability for the year. Or you could pay a percentage of the previous years withholding.

You can now work with your boss on how much tax is withheld from your pay.

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