Form W-4 End of Year Updates | H&R Block

October 17, 2017 : Monica Welsh

What is a Form W-4 and how does it relate to withholding allowances?

If you are a wage-earner, one of the biggest ways you can decrease your tax liability or increase your refund year-to-year is through your selected withholdings. The Federal and State income tax withholdings subtracted from each paycheck have a major effect on the amount of tax liability you owe or total tax refund you may receive next spring.

As we approach the close of 2017, this is the perfect time to review your withholding totals for the year. This is also a great opportunity to see if there are any adjustments you can make to prevent a liability come April 2018.

These withholdings can be altered anytime by updating the Form W-4 on file with your active employer. Always consider discussing your withholding options with your trusted tax preparer before making the described changes.

When should I adjust my Form W-4?

U.S. income tax is based on a pay-as-you-go system. This means that there may be required withholdings for certain payments. Also, if you don’t have enough withheld or paid throughout the year, you could be charged a penalty.

Over the course of a year, if you’ve seen a large amount of withholding pulled from each paycheck, this could amount to a significant refund. Some would prefer to have extra cash in their wallet now versus waiting on an income tax refund next April.

Conversely, if you have under-withheld over the course of the year, a review of your taxes paid may reveal that you could be subject to a tax liability in the spring. Life changes can also influence your withholding allowances such as:

  • Adding or losing a dependent,
  • Marriage or divorce,
  • Buying or selling a home,
  • Tax credits for which you qualify, such as the education credit,
  • Changing/adding jobs, and
  • Winning the lottery (well, we can dream).

To Claim, Or Not To Claim?

When completing the Form W-4, you may recall stating how many allowances you are going to claim on your tax return throughout the year. The more allowances you claim, the lower your overall tax should be. This equates to a lower amount of withholding from each paycheck.

Our W-4 tax withholding calculator will help you determine the ideal number of allowances you can take. Generally, you can claim an allowance for:

  • Yourself—so long as you are not a dependent claimed on someone else’s return.
  • Your spouse—unless your spouse has a job and claims a regular exemption.
  • Dependent(s) if any.

If any of these suggestions possibly impact your own taxes, contact the Human Resources department of your active employer. A Form W-4 should be available to make updates as-needed.

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H&R Block Tax Pros are available all-year-round. If you need help determining whether you need to update your withholding allowances before year-end, or just need to ask questions, please contact your local tax preparer.

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Monica Welsh

Monica Welsh

The Tax Institute, H&R Block

Monica is a tax research analyst in the Tax Institute. She specializes in the areas of business and investment. Monica is a graduate of the University of Missouri-Kansas City School of Law with a JD and an LLM in tax.