How Do I Adjust My Tax Withholding

from thomsonreuters.com

The 2010 version of Publication 919, How Do I Adjust My Tax Withholding, is now on the IRS website at http://www.irs.gov/pub/irs-pdf/p919.pdf. Employees use this publication to help them determine if their federal income tax withholding is sufficient, and, if necessary, to prepare a new Form W-4 to adjust their withholding. The publication includes worksheets to help employees estimate their 2010 tax liability (Worksheets 1 and 2), compute withholding (Worksheet 7), and determine the amount of the “Making Work Pay” credit that they will receive (Worksheet 9). The IRS advises employees to check their withholding if they had a lifestyle change (such as a marriage, divorce, birth or adoption of a child, purchase of a new home, or retirement) or significant changes in their income or itemized deductions. There is a good chance that employees are not having enough tax withheld if: (1) they have more than one job at a time; (2) their spouse also works; (3) they have income not subject to withholding, such as capital gains, rental income, interest, and dividends; or (4) they owe other taxes, such as self-employment tax or household employment taxes. Form W-4, line 6, is used to request additional withholding. Adjustments to withholding allowances are made on Form W-4, line 5. Employees must complete a new Form W-4 to adjust their withholding. It is helpful for employers to keep a few copies of IRS Publication 919 in the office, because some employees may soon discover after they file their 2009 personal income tax returns that they didn't have enough money withheld from their paychecks.