Consumer Alert: Was Tax Day a shocker? It may be time to change your withholding certificate!
ROCHESTER, N.Y. – This consumer alert is all about your recovery. The day after Tax Day often calls for a day of rest. And this year is no exception. Many of us ended up owing far more than we have in years past. For me, it was absolutely eye-popping. My husband and I were just gobsmacked. And I’ve spoken to many viewers who either got a smaller refund or were walloped with a tax bill because all those pandemic perks went away.
Last year, we got an enhanced child tax credit, enhanced dependent care credit and a more generous charitable deduction. This year we’re back to pre-pandemic credits and deductions. And the pain was real. The IRS says the average refund was just over $2,900 this year, 11 percent less than last year. The IRS advises you to take a look at your tax withholdings whenever you have a major life event like a marriage, a divorce, job loss, job change, getting a second job, or having another child. You should also take a look at your withholdings if you got a real whopper of a tax bill like I did.
To estimate how much you should get withheld from your paycheck for federal taxes, the IRS advises you to use its tax withholding estimator. It’s fairly simple. You plug in your information, and it gives you an estimate. Then you can change your withholdings by filling out a withholding certificate and give it to your employer.
When former President Trump reformed the tax code, changes were made to try to simplify this process. On the withholding certificate, just underneath the area for your name and address, you’re asked to check whether you’re single or married filing separately, married filing jointly or head of household. You are no longer asked to claim a number and the higher the number the less is taken out of your paycheck. Then toward the bottom of the page on step four, you can indicate an additional dollar amount you want taken out of each paycheck. Of course, if you’re changing your withholding now, you have fewer paychecks to try to achieve the amount you want withheld by the end of the year. Then you turn in that form at work.
And there are many factors that will affect your withholding amount. Does your spouse have a job? Do you have a second job? The IRS withholding estimator is a good tool to at least get you in the ballpark. Also, take this opportunity to go back to your tax preparer to get his or her professional advice on adjusting your withholding. Let’s hope next year, we all get fewer unpleasant surprises from our dear ole’ Uncle Sam.