At Aim Financial, we encourage our tax clients to review their federal income tax withholding whenever their financial or employment situation changes. One of the simplest ways to improve the accuracy of your tax withholding is to complete an updated Form W-4, Employee’s Withholding Certificate.

A properly completed W-4 helps your employer determine how much federal income tax to withhold from each paycheck. While some taxpayers intentionally choose extra withholding to receive a larger refund, others may prefer to have their withholding more closely match their actual tax liability throughout the year.

When Should You Consider Updating Your W-4?
An updated W-4 can be particularly beneficial after a significant change in your circumstances. Examples include starting a second job, getting married or divorced, having a spouse begin or stop working, receiving a substantial increase or decrease in income, or experiencing changes in dependents or deductible expenses.
Multiple-job situations deserve particular attention. If you and your spouse both work, or if you hold more than one job, simply completing the basic portion of Form W-4 for each employer may result in too little federal income tax being withheld. The W-4 provides specific instructions for accounting for multiple jobs and higher-earning spouses.

Understanding the Multiple Jobs Worksheet
For taxpayers with multiple jobs, the Form W-4 includes a Multiple Jobs or Multiple Spouses/Jobs Worksheet designed to help calculate the additional withholding needed. Generally, the worksheet considers the income from the different jobs and helps allocate the appropriate amount of additional withholding to the highest-paying job.
The result can be entered on Form W-4 as an additional withholding amount. This approach can be useful for taxpayers whose income is relatively predictable and who are comfortable working through the calculations themselves.

What About the Deductions Worksheet?
The deductions section of Form W-4 can also affect your withholding. Taxpayers who expect deductions beyond the standard deduction may use the Deductions, Adjustments, and Additional Income Worksheet to determine whether adjustments to withholding are appropriate.
This can be especially relevant when a taxpayer has significant deductible expenses or other adjustments that may reduce taxable income.

When Should You Use the IRS Tax Withholding Estimator?
For more complicated situations, the IRS Tax Withholding Estimator may provide a better alternative to relying solely on the W-4 worksheets. The estimator can incorporate information such as multiple jobs, wages, withholding, dependents, other income, and deductions to provide a more personalized withholding recommendation.

At Aim Financial, we recommend reviewing your withholding rather than waiting until tax season to discover that too little—or significantly more than necessary—was withheld.

The goal isn’t simply to maximize your refund. The goal is to have the right amount of tax withheld throughout the year.

If your employment, income, marital status, dependents, or deductions have changed, contact Aim Financial. We can help you evaluate whether an updated Form W-4 and additional withholding may be appropriate for your situation.