Don’t Wait - Take Advantage Of New Tax Credits And Deductions Now!
Changing Your Deductions NOW Could Put More Money in Your Pocket Later
New York, NY, Fourth Quarter, 2008 – Why wait until next April to get money back when you can reduce the withholding from your paycheck and pad your pocket now? According to Kim Thomas, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters, new deductions and credits from recent changes in the law can help decrease your tax bite.
Are you able to take advantage of the new temporary tax credit for homebuyers, or the temporary property tax deduction for non-itemizers? If so, Thomas says there are some easy steps that can be taken to adjust your withholding. Making certain that you pay in the right amount of taxes for next year is as simple as giving your employer a new Form W-4. Thomas says that if you act now, you won’t lose out on interest income you could be earning by having those funds in your account instead of Uncle Sam’s pocket. “The sooner you act, the better off you’ll be,” she advises.
“If you can’t take advantage of new deductions or credits, there are other ways to potentially minimize your tax bite that are worth looking at before the end of 2008”, she advises. “If any of the following situations are on your horizon this year, you should check your withholding and consult with your tax advisor.”
· Birth or adoption of a child
· Loss of a previously eligible dependent (your college aged student is now over age 24).
· Job change (if you’re married, this includes your spouse), such as taking a new job, retiring, or being laid off.
· Change in income not subject to withholding (such as dividends, interest, or capital gains).
· Purchase or sale of a home.
To change your withholding, give your employer a new Form W-4 (Employee’s Withholding Allowance Certificate) to adjust the amount withheld from your remaining 2008 paychecks. Specifically, you can adjust your withholding by increasing or decreasing the number of allowances claimed on your Form W-4. The more allowances claimed, the lower the withholding from each paycheck, and vice versa.
“However filling out a new Form W-4 without a tax professional is not always easy because the tax rules are complex,” says Thomas. There are three worksheets in the Form W-4 instructions that may have to be completed in order to get to the number of allowances to claim: the personal allowances worksheet, the deductions and adjustments worksheet, and the two-earner/multiple jobs worksheet.
According to Thomas, before you start sharpening pencils and breaking out into a sweat, there is an easier way - -with internet access. The IRS has an online calculator that’s quick and easy to use. You can find the calculator at www.irs.gov. From the home page, click on the “Individuals” link. Then scroll down and click on the “IRS Withholding Calculator” link and follow the easy steps. You’ll end up with the magic number of allowances to put on your new Form W-4.
This online calculator works pretty well, according to Thomas, at least well enough for the majority of individual taxpayers. “However, with any complex issues such as self-employment income or alternative minimum tax, it will not be sufficient.” Thomas recommends consulting your tax professional in those cases. “The cost of adjusting your allowances will be well worth it in the long run,” she says.
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