Change in Tax Withholding Status

taxesPayroll tax withholding is based on how a person claims on their tax return. Classifications are single, married, head of household, or married filing separately.  A person also chooses the number of deductions based on dependents.  If you are an employee, you were required to fill out a form W-4 so the payroll company could properly calculate the payroll tax deductions. If you own a business, you are making estimated tax payments based on your expected tax liability which has taken your filing status into consideration.

If you have recently had a change in status, this information needs to be updated. Perhaps you have recently married, had a child, or divorced. This change can impact your tax liability, so make sure your information has been updated with your employer by submitting a new W-4 form. If a business owner, discuss this change with your tax preparer to make sure you aren’t paying too much or too little for your tax payments.

You also need to make sure your information to be reported on your tax return is updated with the IRS and Social Security Administration. If you had a name change, complete Form SS-5, Application for a Social Security Card. You can get this form on their website at SSA.gov, by calling 800-772-1213 or by visiting your local SSA office. If you’ve had an address change, submit Form 8822, Change of Address to notify the IRS.

If you have more than one source of income, make sure you take this into account when determining your number of allowances. This may put you into a higher tax bracket and result in a tax liability.

If you need help determining how to figure the right tax withholding, you can visit http://www.irs.gov/Individuals/IRS-Withholding-Calculator for assistance.

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