Federal Income Tax Withholding Too Low This Year?

September 22, 2009

Federal income tax withholding tables were adjusted earlier in 2009 due to the “Making Work Pay” tax credit as part of the economic stimulus package.  The reduction of federal income tax withholding was intended to provide a gradual financial benefit to the economy by putting a little more money in your paycheck each month.

Federal Income Tax Credit Impact

Many employers and payroll companies automatically handled the change in tables so many workers didn’t have to fill out any paperwork to take advantage of the tax credit.  Of course, based on your financial situation, this change could potentially result in withholding less than your personal income tax liability.

As we approach the final quarter of the year it would be smart to check your tax withholding levels.  The following groups of people should pay close attention:

  • Pensioners
  • Married couples with two incomes
  • Individuals with multiple jobs
  • Workers who can be claimed as dependents by other taxpayers

Federal Income Tax Withholding Calculator

You can check out the IRS Withholding Calculator to make sure you’re withholding enough from your paycheck for 2009.  The IRS Publication 919 (How Do I Adjust My Tax Withholding) is another good resource for income tax withholding.

Remember, although your payroll department may have adjusted your withholding automatically they don’t know your personal finance situation. This means it’s up to you to submit a Federal W-4 if you need to change your amount of withholding.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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