You don't want to get caught with a surprise tax liability when your tax return is prepared. It is common to have short withholdings from paychecks in the following scenarios.........
- Both spouses in a marriage work. This often results in a shortage of tax withheld. This can be avoided by paying special attention to the instructions on your W4 Form. There is a section on the right-hand side that discusses this specific scenario.
- You have multiple jobs at one time. This also commonly results in a shortage of tax withheld if you don't follow protocol with your W4 Forms for each job. If you don't inform each employer of your other job through your W4 Form, each employer will withhold as if their payments to you are your only income. Because of our progressive tax system (you pay higher tax rates at higher income levels), your employers need to be able to estimate your total income from all jobs by way of your W4 Form.
- You change jobs in the middle of the year. This one is always a shocker. It essentially results from the same issue in #2 above. You have to adjust W4 Forms as if you have multiple jobs, since you actually do have multiple employers for the year.
If you ever need help navigating through a W4 Form, contact me and I'll be happy to help!!