Most people have too much tax withheld from their paychecks and wind up getting refunds when they file their tax return. But rather than waiting until spring to get your refund, wouldn’t you rather have that money now?
Well, you can. The IRS website has long offered a Withholding Calculator to help taxpayers fill out their W4 to have the right amount of taxes withheld from their paychecks. The nice thing about the withholding calculator is it takes into account your income and withholding to date. Since most people have too much tax withheld during the year, this means they can actually reduce their withholding for the last few paychecks and still not owe anything (or very little) at tax time.
If you want to boost your last few paychecks of the year (just in time for the holidays!), I recommend sitting down with the Calculator, last year’s tax return, and your most recent paystub(s). If you’ve got a fairly simple situation this year, you should be able to navigate the calculator to find out how much to adjust your withholding for the rest of the year. And you might just wind up with an extra thousand dollars in your pocket by year-end instead of waiting several months (while those credit card bills accrue interest). Just don’t forget to change your withholding back once the new year begins, or you might have a huge tax bill next year!