Why would you owe federal taxes even though your employer withholds taxes from your paycheck throughout the year? Learn how the number of allowances you claim can affect your balance with the IRS on July 15th in this video on tax basics.
UPDATE: The Treasury recently announced tax changes and updates in response to COVID-19. Updates include an extension until July 15, 2020 for all taxpayers that have a filing or payment deadline that normally falls on or after April 1, 2020 and before July 1, 2020. Please see the latest information on tax deadlines and stimulus updates related to COVID-19 on the TurboTax Coronavirus Tax Center and detailed information about federal and state tax changes on our Coronavirus blog post.
The IRS has revamped Form W-4. The content regarding changing "allowances" no longer applies to the new W-4 form.
Hello, I'm Sara from TurboTax with some important information for taxpayers who need to make additional tax payments on April 15th (July 15 in 2020).
Every year, certain taxpayers are surprised that they owe additional income taxes even though their employer withholds taxes from their paycheck each week. This is not as uncommon as you may think, and there are many reasons why it could happen.
Remember when you first started your job and your employer had you fill out a W-4 form? Well the more allowances you claimed on that form the less tax they will withhold from your paychecks. The less tax that is withheld during the year, the more likely you are to end up paying at tax time. But you can avoid this happening again by making changes to the form.
Essentially, the number of allowances you claim relates to your filing status and the number of dependents you anticipate claiming. If you over estimate your dependents or choose a filing status that you are ineligible for, then your withholding will always be less then the amount of tax you owe.
You need to remember that the W-4 form you fill out only applies to one employer. So if you earn income elsewhere, your withholding won't reflect this. You can correct this though. All you need to do is request additional amounts be withheld each period, regardless of the allowances you claim. You can select any additional amount you like to be withheld.
In a nutshell, over-withholding means you'll get a refund at tax time. Under-withholding means you'll owe. Many people try to get as close as possible to even so they get more money in their paychecks during the year, but don't owe a lot or get a bigger refund at tax time. The key is managing your withholding to get the result you are looking for. For more tax tips and guidance visit TurboTax.com.
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