Withholding Allowance
Categories: Accounting, Regulations, Company Management
When you’re working for The Man, you only get a portion of your paycheck. The rest evaporates into the ether called “withholding tax,” which is the amount your employer holds onto in order to pay Uncle Sam the taxes you owe him.
If you want to make your paycheck bigger and reduce the amount that’s withheld for taxes, you can increase your withholding allowance. Withholding allowance is an exemption that lets you reduce how much your employer takes from your paycheck for taxes.
While this might sound all fine and dandy, there’s no secret way to keep more money from taxes happening here. You can only get a withholding allowance if your life calls for it, like if you have dependents. With dependents, your paycheck will be a bit bigger than without. But if you claim more withholding allowance than you should have, you’ll end up paying more in taxes when tax season comes around. Ew, we know.
Likewise, if you end up not claiming your withholding allowance, you’ll get more money in tax returns during tax season. While getting something that feels like a bonus paycheck feels nice, it’s not ideal, since you could have been getting that money in increments over the year. It's better to have money sooner rather than later. Just think of how much interest that money could have earned, or the value it could have provided you if you had received it earlier. Check the IRS’s withholding allowance Goldilocks formula to get a withholding allowance that’s not too small, and not too big. Just right is preferred.
Related or Semi-related Video
Finance: What is the IRS?19 Views
Finance allah shmoop What is the i r s Well
i rest might be the three most hated letters in
the alphabet Well after d m v a pms and
well maybe std The i r s is the internal
revenue service Their internal i e inside the government they're
in charge of collecting revenue A k a They take
money from your pocket in the form of taxes and
they deliver it to uncle sam and they you know
service you and it doesn't feel good So yeah these
are the guys from the us treasury department who checked
to make sure you filled out your income tax forms
correctly and submitted the proper amount And if you screwed
up in any way they will let you know about
it and a half in the form of angry letters
Phone calls knocks on your front door rocks through your
back window Whatever it takes to get you to pay
your fair share of taxes Like why should you get
away with not paying when the jones has paid all
they owed Or the irs can do even worse and
audit you with an audit he irs will request extensive
and very specific information and records from you Paycheck deductions
all kinds of things You claim that you did that
were deductible that may or may not have been forcing
you to spend hours upon hours at your public storage
unit digging through boxes you hoped and prayed you'd never
see again Well after the third solid week of having
your financial history poked and prodded like you've had to
turn your head and cough you uh might actually be
ready and willing to trade in those three letters of 00:01:35.13 --> [endTime] irs for rough one of those stds instead