News Release Distributed 05/20/10

Tax time may be over, but you can review the amount that will be withheld by your employer in preparation for 2010 taxes any time of year.

Any time your financial situation changes, you need to think about the withholding amount, says Gloria Nye, LSU AgCenter family economist. For example, if you buy a house, get married, or have a baby, this may change how much you want withheld.

Did you get back more than $500 from the IRS for your income tax return this year, or did you have to pay more than $500 in addition to what was withheld from your paycheck for taxes? The ideal is to have your withholding come as close as possible to your actual tax owed at the end of the year.

If you got back more than $500 for your income tax return, then you have been giving the federal government an interest-free loan. You’d be better off adjusting your W-4 to decrease your withholdings so you get more in each paycheck and come closer to getting zero back for your tax return next year.

If you ended up having to pay more than $500 for income tax this year in addition to what you had withheld from your paycheck, then you can consider adjusting your W-4 to increase withholdings to get a little less in each paycheck so you come out closer to owing zero additional taxes next year.

To help you make this decision, go online to the withholding calculator at www.IRS.gov. You will be led through a series of questions to help you to determine your withholding. Use the results from the calculator to complete a new W-4 form that you can then submit to your employer.

Doing this withholding review annually, as soon as possible after tax time, can give you more money to spend the rest of the year or keep you from having to pay extra taxes for 2010, Nye says.