The new year’s starting and as usual I got an e-mail from my emplyer stating that I need to update/confirm my W-4 information.
But I’m not sure what to do. We just had twins so I’m probably allowed more deductions, but I take 0 deductions now and still ended up paying taxes last year. I’m afraid of taking deductions just to find out I owe a big lump of cash come next spring.
So can I change my deductions at any time? can I wait a few months? Do I HAVE to do it now?
You should be able to do it anytime you want. Doesn’t make much difference to the employer, they just have to change one little number in their payroll software.
Yup, you can change it anytime. Your employer will tell you how long it takes them to reflect the changes in your paycheck (usually 1-2 pay periods).
Just a clarification on terms. On a W-4 (this is a PDF file), you specify personal allowances, which tunes how much withholdings are taken. If you are taking 0 and still owe taxes, you can add an additional dollar amount on the W-4 (line 6).
On your 1040 you specify exemptions, which is the number of dependents (or other exemptions for age or disability), which reduce your income for tax purposes.
On your 1040 Schedule A (which is optional) you specify deductions, which reduce your income for tax purposes.