Updated: Aug 16, 2022
What's going on errybody? It's been one of those weeks, let alone one of those days...can we just tell the truth it's been a couple of them years and yet we are getting ready to roll right out of summer and slide into fall and I still have folks asking me that age old question, "HOW DO WE MAKE SURE I DON'T OWE TAXES NEXT YEAR?"
Would you believe me if I told you that you truly hold the key to whether or not you owe taxes, you just don't even realize the power happens to be all in your hands. We're going to have to take it back to the basics for you to truly understand how this all works so let's go on a little ride using me as your tour guide (#bars #thischickisbad #sherhymesanddoesaccounting). Nobody better tell me that don't rhyme because in my head that was a mic drop.
Okay, okay let me be serious.
Back in the day when I first started my official "big girl job," I sat down and filled out tons of paperwork like I was signing for a house.
Life insurance documents
Health insurance forms to read
Documents to get a badge (I told y'all I use to be a Federal Employee)
All those all confusing payroll documents
Now like everyone else that was coming right out of college and had all these forms to fill out, I was looking all around the room trying to complete my FormW4 (withholding documents) for the Federal and State taxes and was acting like I wasn't looking on my neighbors paper, because this wasn't an open book test and cellphones won't popping like that back in 1999. Now even as a person who LOVES taxes, them forms were still hella confusing.
Do I put 0 or .... do I really count myself... or what does this EXEMPT box at the bottom really mean. If you tell the truth we all were shooting in the dark and most of us still are. Do you know how I know? Because, baby if you go to fill out a hard copy W4 you are in for the shock of your life, because 0-10 ain't there and it's asking you to fill the form out in $ and cents. Yeppers, we done moved on up into some sophisticated territory. But y'all know I got you.
Right after the tax season, I recorded a video for my Total Tax Experience, LLC clients where I walked them through how to fill the W4 form out. And of course, it's your lucky day, because I'm about to share it with you. As soon as I break things down real quick-fast like for ya.
The funds that your employer reserves/sets aside from your paycheck and pays the IRS and the State on your behalf.
How Does My Employer Know What To Withhold?
YOU tell your employer what to withhold by completing the W4 and State withholding forms. You see how I keep telling you that you have way more control than you want to give yourself credit for?
What Information Does My Employer Need to Know To Get It Right?
Your employer needs to be aware of your:
Income (they definitely got that info)
Your filing status (Single; Married filing Single; Married Filing Jointly; Head of Household)
Number of Dependents (Children 17 and younger are $2,000/qualifying child. All other qualifying dependents are $500) Sounds like we need a discussion on qualifying dependents. Leave a Comment if that sounds like a YES
If you have any additional withholdings
How Frequently Do I Need to Be Checking My Withholdings?
I would encourage you to an annual checkup around filing season. This is a great thing to discuss with your tax pro when reviewing your tax returns. But the most common times are:
Early in the calendar year.
When the tax law changes (LORD HAVE MERCY that could be every 3 months with how we living now a days).
When you have adjustments in your income.
When you have lifestyle changes (marriage; birth; death; divorce; adoption; property purchase; side hustle popping off; etc.)
Resources To Learn How To Complete the W4 Correctly
I am not going to ever leave you without same ways to take action so know that here are your #cheatcodes:
You can use the IRS' Tax Withholding Estimator. But you are gonna need to have your tax documents handy.
Next week we are going to get into how the IRS Tax Withholding Estimator works and I am going to record a tutorial on how to use this powerful tool. Until then don't say I ain't never gave you nothing. The Tax Cop got to go get things in order for the weekend, so I will talk to you all soon.