Have you taken the time to check your income tax withholding for 2011? It's true that there were no major changes in tax rates or deductions for this year. However, there are still several reasons why you might want to adjust your withholding.
For example, if you’ve bought a house for the first time, the deductible mortgage interest could cut your taxable income. That means you might need less tax withheld from your paycheck every month. Or if you refinanced last year, your interest deduction could be lower and you might want more dollars withheld.
Even if your financial situation hasn’t changed, your withholding could be higher than it needs to be. Many people like to have extra withheld so they receive a large tax refund each year. That’s fine if you’re worried about being surprised by a big tax bill, but it means you’re making an interest-free loan to the government. If you’ve consistently received a large refund for several years, consider reducing your withholding. Don’t just fritter away the extra takehome pay. Use the money wisely by paying down credit card debt or boosting your retirement contributions.
You can adjust your withholding by asking your employer for a Form W-4 and filling out the simple worksheet. If you need help figuring out the right withholding level, contact our office.