Did you end up owing come tax time in 2019? If so, you may want to consider updating your W-4 to get back on track for the 2020 tax year. The IRS recently made a big overhaul to the format of the W-4 so navigating it will be quite a bit different from the last one you filled out.
-No more allowances
-New lines to account for tax deductions and other income outside of wages
-A new format to account for households with multiple jobs
Step 1 – Fill out personal information
Step 2 – Multiple jobs worksheet. If you only have 2 household jobs and pay is similar, you can simply check a box. If one job pays more or there are more than 2 jobs, you can use the worksheet to calculate.
For example, a couple filing jointly where one spouse makes $140,000 and another spouse makes $90,000 should withhold an additional $14,120 per year or $543/paycheck if they are paid bi-weekly.
The IRS advises that you fill out step 2 for only the higher paying job.
Step 3 – Claim Dependents. Here you enter the number of qualifying children under the age of 17 and multiply by $2,000 and multiply the number of other dependents by $500.
Step 4 – Other Adjustments.
Other income – You can use this section to report other income where taxes are not withheld such as expected investment income.
Deductions – You can use the worksheet to estimate if your itemized deductions are above the standard deduction. If they are, you report the difference here. For example, if your standard deduction is $24,800 and your itemized deductions are $30,800, you would enter $6,000.
Extra withholding – You are able to enter in any other additional withholding that you want.
Step 5- Sign and date.
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.