Tips on Managing Your Tax Withholdings

This is an excerpt from an article is written By Tom Breedlove of Breedlove & Associates and is re-osted from Regarding Nannies because I know that the "business" side of nanny-ing is always complicated.  Hopefully Mr Breedlove can help you navigate through it.  To view the entire article please visit HERE.

We’re all okay with a surprisingly-large refund, but a surprisingly-large payment is not fun.   If you don’t want to owe money at the end of the year, the answer is to decrease your allowances on Form W-4.  For instance, if you’re currently at Single with 2 allowances, consider changing it to 1 allowance or maybe even 0 allowances.  (Each allowance will reduce your weekly take-home pay by about $10 depending on your income level and state, thereby reducing your year-end federal income tax liability by about $500).  Note: On the W-4 Line 6, you can pick an additional amount, say $5, to withhold each paycheck.  This enables taxpayers to more precisely manage their withholdings.

Conversely, if you have a very large refund and want to have access to more of that money during the year, you should increase your allowances on Form W-4.  Again, each allowance you add will put an extra $10 or so in your pocket each week.  (Keep in mind that your refund at the end of the year will be reduced by about $500).