{"id":1142,"date":"2013-11-05T08:07:55","date_gmt":"2013-11-05T13:07:55","guid":{"rendered":"http:\/\/keysolutions.us\/blog\/?p=1142"},"modified":"2013-11-05T08:07:55","modified_gmt":"2013-11-05T13:07:55","slug":"why-irs-form-w-4-results-in-underwithholding-of-taxes","status":"publish","type":"post","link":"https:\/\/keysolutions.us\/blog\/why-irs-form-w-4-results-in-underwithholding-of-taxes\/","title":{"rendered":"Why IRS Form W-4 Results in Underwithholding of Taxes"},"content":{"rendered":"

Every tax season we hear a familiar question: \u201cWhy didn\u2019t my employer withhold enough federal income taxes from my paycheck and what can I do about it?\u201d Why am I subject to underwithholding penalties?<\/p>\n

What is form W-4 and why does my employer require me to fill it out?<\/b><\/p>\n

The IRS form W-4 is used by your employer to calculate how much federal income tax to withhold from your paycheck per your instructions to the employer.\u00a0 If you fail to give the employer a W-4 form, the employer is required to withhold as if you were a single taxpayer with no dependents. The form only takes into account your filing status and number of exemptions you claim on this form.\u00a0 Thus, if you are married with two children and you are the sole breadwinner for your family<\/span> and you fill out your W-4 as married with 4 exemptions, the amount of tax your employer withholds should equal the amount of tax due when you file your tax return.<\/p>\n

I filled out the W-4 correctly, but why do I still owe the IRS?<\/b><\/p>\n

The W-4 is an antiquated form that only<\/span> takes into account your filing status, number of dependents you claim, and assumes<\/span> the family has only one source on income<\/span>.\u00a0 For many families, this is just not the case.\u00a0 If you have a second job, your spouse works, or you have other sources of income (interest, dividends, rental income, retirement distributions, social security, etc), you may find that there isn\u2019t enough tax being withheld from your paycheck resulting in a balance due come April 15.<\/p>\n

For some taxpayers, the exact opposite happens. They itemize their deductions and are entitled to receive tax credits and they find that they have large refunds due them each year.<\/p>\n

How do I change my W-4 to have the proper amount of taxes withheld from my paycheck?<\/b><\/p>\n

For many individuals, the only time they fill out the W-4 is when they start a new job.\u00a0 Employees rarely update this form. The IRS\u2019s rules say that employees can change their W-4 as many times as needed during the year simply by submitting a new W-4 to their employer.<\/p>\n

By claiming fewer exemptions or by selecting single as opposed to married on the W-4, more taxes will be withheld from your paycheck. There is no requirement that your W-4 mirror your tax return.\u00a0 If you file your tax return as married there is nothing prohibiting you from choosing single on the W-4 or less exemptions.<\/p>\n

There are no maximum exemptions you can claim.\u00a0 The more exemptions you claim the less tax you will have withheld from your paycheck.\u00a0 Keep in mind, if insufficient taxes are withheld you could be subject to an under withholding penalty from the IRS.<\/p>\n

What can I do if I fill out my W-4 as Single 0, and I still owe money to the IRS?<\/b><\/p>\n

When you fill out your W-4 as Single with zero dependents your employer will withhold the maximum amount of taxes according the IRS tables<\/span>.\u00a0 Unfortunately for some taxpayers, their withholdings still won\u2019t be enough.\u00a0 There are three options you can choose.<\/p>\n