It is important to regularly review your W-4 Withholding, especially as a new year begins, to assure proper payroll tax withholding for the year.

If tax withholding amounts are too high, employees are in effect making an interest-free loan to the U.S. government and will be losing out on use of those funds during the year until tax return refunds claims are filed. On the other hand, if not enough is being withheld, the employee may be subject to a penalty when filing her or his personal income tax return. Generally, a penalty will apply if a taxpayer’s withholding and estimated tax payments total less than 90% of that year’s tax liability as calculated on the income tax return and less than 100% of the previous year’s tax liability.

NOTE: W-4 forms cannot have missing signature, crossed and initialed corrections, and/or written in alterations. False information on the W-4 invalidates the form.

Reasons to Consider Changes to W-4 Withholding

There are many lifestyle, work, and family-related reasons for employees to change withholding from one year to the next. Here are some, but not all, of the possibilities:

• Change in marital status

• Retirement or imminent retirement

• Birth or adoption of a child, or a child no longer eligible to be claimed as dependent

• Changes in jobs or compensation levels for either spouse

• Purchase, sale, or refinance of a home

• Changes in income not subject to withholding such as independent contractor payments, dividends, interest or rental income, or capital gains

How Can You Determine Optimal W-4 Withholding?

1. The Internal Revenue Service provides a recommended withholding calculator at http://www.irs.gov/individuals/article/0,,id=96196,00.html

2. The American Payroll Association provides a link to a paycheck calculator through their web site at https://www.paycheckcity.com/calculator/w4assistant/

Although the Payroll Office does not provide tax advice, you may call the Payroll Office if you have questions about the W-4 process.