![]() You could also use that extra money to make extra payments on loans or other debt. If you opt for less withholding you could use the extra money from your paychecks throughout the year and actually make money on it, such as through investing or putting it in a high-interest savings account. Of course, if you opt for more withholding and a bigger refund, you're effectively giving the government a loan of the extra money that’s withheld from each paycheck. Each of your paychecks may be smaller, but you’re more likely to get a tax refund and less likely to have tax liability when you fill out your tax return. If the idea of a big one-off bill from the IRS scares you, then you can err on the side of caution and adjust your withholding. That would mean that instead of getting a tax refund, you would owe money. The downside to maximizing each paycheck is that you might end up with a bigger tax bill if, come April, you haven't had enough withheld to cover your tax liability for the year. ![]() One way to manage your tax bill is by adjusting your withholdings. The new version also includes a five-step process for indicating additional income, entering dollar amounts, claiming dependents and entering personal information. Instead, filers are required to enter annual dollar amounts for things such as total annual taxable wages, non-wage income and itemized and other deductions. Additionally, it removes the option to claim personal and/or dependency exemptions. It's important to note that while past versions of the W-4 allowed you to claim allowances, the current version doesn't. When it comes to tax withholdings, employees face a trade-off between bigger paychecks and a smaller tax bill. If you think you qualify for this exemption, you can indicate this on your W-4 Form.
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