The federal law requires employers to take a portion of their employees’ wages and forward them to the Internal Revenue Service. The employees – in a way – control how much tax is taken out from their income by filling out a W4. The form lets the employees give information about their anticipated federal income tax returns to their employers and based on that information and the guidelines provided by the IRS, the withholding is determined.
The W4 details a lot, and one of the most commonly used parts of it is the extra withholding section. Form W4 extra withholding amount is determined by an employee and withheld by the employer in extra for every pay period. The most commonly made mistake when entering an extra withholding amount is thinking that the extra withholding is effective for the remainder of the tax year.
What is extra withholding and how to do it
When you enter an extra withholding, the amount will be withheld every time you get your paycheck. For example, if you enter $50 and you get paid biweekly, you’re going to withhold $100 on top of the monthly withholding. Assume your employer withholds $250 every month under regular circumstances, and with the extra withholding, your total tax paid will be $350.
Knowing these can make a significant impact on your taxes and make your finances a lot easier to manage. After all, nobody would want to get hit with an unexpected tax liability. The extra withholding part on Form W4 provides just that, as you can withhold additionally when you’re not withholding as much tax as you should to compensate your owed tax. Here’s how to pay more taxes every paycheck using Form W4, every pay period.
Filling out extra withholding part
Under Step 4: Other Adjustments, which is completely optional, enter the amount you want your employer to withhold every pay period in extra. We strongly recommend not going overboard with extra withholding.
If you’re just a few months into the tax year – let’s say it’s April, don’t enter a big amount as there is a lot for the tax year to end. However, we don’t always have enough time. If the end of the tax year is near and you got a significant income out of nowhere that will alter your taxes, you’re going to need to enter a bigger amount. It’s best to do the math and figure out how much tax you need to withhold additionally before actually entering an amount on the W4 extra withholding.