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When and How to Change Withholding on Wages
- Employees who found that they either owed income tax or had a large tax refund for 1999 may want to adjust their withholding amounts for 2000. An adjustment in withholding should also be made if certain events occurring during 2000 will change a person's marital status, credits, deductions or number of exemptions.
- To make an adjustment, employees must give their employer a new Form W-4. The form include three types of information that the employer uses to figure the withholding amount: Whether to withhold at the single rate or the lower married rate, how many withholding allowances the employee claims, and whether the employee wants an additional amount withheld.
- Even if you have already given a Form W-4 to your employer for 2000, you still should check to see if enough tax will be withheld for the year. When you receive a pay slip or statement for a full payroll period in 2000 showing tax withheld based on 2000 tax rates, you should work out both your tax and withholding for the year to see if you're having the right amount of tax withheld.
- If too little tax will be withheld you should give your employer a new Form W-4 showing an additional amount to be withheld from your pay. If your calculation shows that you will have a large refund coming next year, you may want consider getting some of that money now rather than lending it to Uncle Sam interest-free. Give your employer a new Form W-4 claiming more withholding allowances and don't wait for the refund.
- Any additional amount you wish to have withheld should be entered on line 6 of the 2000 form. If this amount is withheld from your pay each payday, you will avoid owing a large amount of tax at the end of the year. Make sure, however, that you enter the same number of withholding allowances on the new Form W-4 that your employer now uses for withholding. The completed form should be given to your employer so that the additional amount will be withheld by the next payday.
- Under certain circumstances, a new Form W-4 must be filed whether or not the employee desires to change the withholding amount. You are required to give your employer a new Form W-4 within 10 days after a divorce if you have been claiming married status, or after any event that decreases the number of withholding allowances you can claim. Such situations include:
- You've been claiming an exemption for a spouse but are now divorced, or your spouse is now personally claiming an allowance on a separate form W-4.
- You've been claiming an allowance for a dependent but no longer expect to provide more than half the dependent's support for the year.
- You've been claiming an allowance for a child, but the child will earn $2,800 during 2000 and will be at least 24 by the end of the year or will be at least 19 by the end of the year and will not be a full time student.
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