Manage Your Money

Master the skills that can help you manage money throughout life.

Tax Withholding

Form W-4 and how to fill it out

IRS Form W-4

Because all of us pay federal income taxes, if you begin a new job, your employer will ask you to complete a Form W-4. This form gives you a chance to decide how much money the Internal Revenue Service (IRS) will withhold from your paycheck to pay those taxes. Deciding the amount isn't easy and the amount will depend on your strategy.

Some use this withholding as a type of saving account. Withholding more money from each paycheck could result in a larger tax refund in April. This is potentially a good thing, because the refund could help you reduce debt or make a substantial purchase. However, this strategy requires that you have enough discipline to use the refund as you planned. Additionally, with a large refund, there's some risk you could lose the money due to identity theft or tax season scams.

Some would rather withhold as little as possible with each paycheck. That way, the money is yours to manage all along. Then, come April, there is a very small refund, if any at all. With this approach, be careful not to underestimate what you will owe. Why? Because doing so would mean you would owe additional taxes.

Use this helpful IRS Withholding Calculator when deciding how to complete and/or adjust your Form W-4.

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