When it comes to withholding, too little is always worse than withholding too much. If you’re going to make an error, most people would rather overpay and get some money back rather than face a large tax bill at tax time. Even if you already set your withholding through your employer, this isn’t set in stone. Federal law says you can change your federal withholding certificate (W-4) as often as necessary. Keep in mind, when you make a change to your federal withholding, your state withholding may need to be adjusted as well. If you receive a large refund or owe a large tax bill, there’s a good chance you need to adjust your withholding.
If you’re unsure about how much you should be withholding, you can schedule an appointment with us any time. We will review your salary information and tax liabilities to help you decide what’s best. For some taxpayers who work in a different state than where they live – Kansas/Missouri – the state where they earn W-2 income may not withhold enough state income tax to cover their residence state tax liability. Also, you can designate exactly how much you want withheld from your pay for federal and state income taxes, regardless of what the W-4 calculation says. If you already work with a tax preparer, it’s a good idea to consult thembefore you make changes to your withholdings.
As you’re reviewing your income and liabilities, you need to balance the big picture. When you withhold too much you will get a tax refund, however, that’s also income you’re loaning to the government interest-free throughout the year. Are there investments you might rather direct that income to? Or, would you or your family benefit more from having that extra money in your take-home pay? On the flip-side, no one likes to pay come tax time. But when you withhold too little, you’re more likely to face a tax bill.
We partner with our clients to estimate what their current year earnings will be, then review prior year taxes and amount due. With this information, we can project whether or not the current withholding rate is appropriate, and make any necessary changes. Ultimately, it’s up to our clients if they want a refund on their taxes or want to pay a balance due. Call us at (913) 888-9100 and we’ll work together to get your withholding set right!
Richard Adams is a graduate of Benedictine College in Atchison, Kansas, with dual majors in Accounting and Business Administration. He is also a graduate of Wentworth Military Academy in Lexington, Missouri.