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Jul 27

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Avoid tax surprise

If you have too little federal tax withheld from your pay, you could end up owing a lot of money when you file your taxes. If you withhold too much, you will get a large refund next year, but that means you gave up the use of your money for several months during the year.
“With 2011 half over, there is no better time to check your federal income tax withholding levels to make sure you don’t face any surprises when returns are filed next spring,” said Clay Sanford, an IRS spokesman in Dallas. “It’s fast and convenient to use the online withholding calculator at IRS.gov”
You may need to adjust your federal tax withholding with your employer. Evaluate your withholding if you have recently married or divorced, added a dependent, purchased a home, changed jobs or retired.
The withholding calculator at IRS.gov can help you figure the correct amount of federal withholding and provide information you can use to complete a new Form W-4, Employee’s Withholding Allowance Certificate.

Before you begin, have these items:
• Your most recent pay stubs.
• Your most recent federal income tax return.

Here are some tips for using the withholding calculator:
• Fill in all information that applies to your situation.
• Estimate when necessary. But remember, the results are only as accurate as the information you provide.
• Check the information links embedded in the program whenever you have a question.
• Print out the final screen that summarizes your entries and the results. Use it to complete a new Form W-4 (if necessary) and give the completed W-4 to your employer. Keep the print of the final screen and a copy of your new W-4 with your tax records.

For many people, the withholding calculator is a great tool that can simplify the process of determining your withholding.
However, if you are subject to the alternative minimum tax or self-employment tax or if your current job will end before the end of the year, you will probably achieve more accurate withholding by following the instructions in Publication 919,How Do I Adjust My Tax Withholding, which is available at www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).

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