Did you get a big refund or owe a big tax bill April 15th of this year? If so, now is the time to adjust the amount of taxes withheld from your paycheck. Ideally, you want to get your tax bill or refund as close to zero as possible. Having the wrong amount withheld from your paycheck can lead to costly personal-finance mistakes. Calculate the proper withholdings to avoid a large refund or payment to the IRS.
To figure out how many allowances to claim, use the IRS withholding calculator.
Make sure to have on hand your 2007 tax return and most recent paycheck stub. Once you answer a series of questions, the calculator gives specific directions on how to fill out a new W-4, even offering an estimated refund amount based on the number of exemptions it suggests. Set aside an hour to complete the calculator.
Source: Hard to believe it but the Internal Revenue Service (IRS)
By Diana from Prospect, KY
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