If you work for someone else, your employer calculates your taxes and withholds the appropriate amount from each paycheck. However, the amount your employer deducts depends on the information provided on your W-4. If they take too much, you’ll get a refund during tax preparation season, but if they don’t withhold enough, you might wind up with an unexpected bill at the end of the year. Because the tax code is constantly changing, you need to check your withholding amount every year. To ensure you’re ready for next tax season, here’s what you should know. 

How Withholding Amounts Are Determined

The amount withheld from each check depends on your income level and the current tax brackets, combined with the information contained in your W-4. The filing status you choose, the number of exemptions you claim, and any further withholding you request will raise or lower the amount withheld. Tax preparation professionals recommend matching your withholding exactly to your obligation, so you won’t get a bill or a refund at the end of the year.

When You Should Check Your Withholding Amounts

When you’re going through major life changes, how they impact your taxes may be the furthest thing from your mind. However, marriage, divorce, or the birth of a child can affect the number of dependents you claim, and thus how much you owe at the end of the year. The 2017 Tax Cuts and Jobs Act also changed the liability of almost every taxpayer, so update your W-4 early in the year, especially if you had to pay after filing last year’s returns. To make sure you have the right amount of tax withheld from your paycheck, use the IRS withholding calculator. 

As a full-service tax preparation and accounting firm, The Callen Accounting Group, PLLC offers highly customized service and detailed advice to businesses and residents throughout the Twin Lakes area of Arkansas. With their years of experience and knowledge of the latest changes to the code, you can rely on their team to take the stress and uncertainty out of tax preparation. Visit their website for an overview of their tax services, or call (870) 425-6066 to schedule an appointment today.