New Job? Newly Married? It Might Be Time to Change Your Tax Withholdings

W-4 form and a pen
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Ah, taxes. Can’t live with ’em, can’t drive on public highways or use your friendly neighborhood library without ’em.

It’s a fact of life: If you earn an income and live in this country, you owe the government money. But how do you get Uncle Sam his cut — and figure out how much you’ve gotta pay in the first place?

For employees, it all comes down to tax withholdings. And although your employer does the work of collecting the funds, it’s your job to ensure the amounts are right.

Here’s what you need to know about tax withholdings, including when and how to adjust them.

What Are Tax Withholdings, Anyway?

Tax withholdings are the wages your employer sets aside for the purpose of paying federal and state income taxes. In short, it’s money you earn that you never see because it’s funnelled directly into Uncle Sam’s hands.

Tax withholdings are determined by IRS Form W-4, which you fill out when you start a new job or when you want to adjust your withholdings — which we’ll get to in just a moment. You can see the exact dollar amount of your tax withholdings on your pay stub each pay period, and you can adjust your withholdings by submitting a new W-4 as often as you wish.

When to Adjust Your Tax Withholdings

Filing new tax paperwork is nobody’s favorite pastime — except maybe if you’re a CPA. (Probably not for them, either, though.)

But keeping your tax withholdings up to date is the best way to ensure you’re paying the proper amount in taxes, which can help you avoid underpayment penalties and also keep as much of your money as possible in your pocket.

Here are three scenarios in which you’ll want to adjust your tax withholdings.

1. You Get a New Job

If you change jobs entirely, you probably won’t have to think about filing a new W-4 — your friendly HR rep will simply slide one across the table. But if you start working multiple jobs, take note: You can’t claim the same allowances twice, so you’ll likely need to go back into your original job’s W-4 and make adjustments.

2. You Go Through a Major Life Change

If any of the following scenarios apply, it may be time to change your tax withholdings.

Having a child increases your number of dependents by one. Congratulations! We know you’re busy, but try to find time to file a new W-4. Maybe during naptime.

Getting married can change your filing status, particularly if you plan on filing your taxes jointly. Depending on your new spouse’s income, your overall household tax rate may increase or decrease. The same goes for if you get divorced.

Buying a house can reduce your overall tax liability since most mortgage interest and property taxes are deductible. You’ll save money throughout the year if you adjust your W-4 immediately rather than waiting until Tax Day to inform the government about your new digs.

Earning non-wage income, like side hustle cash or investment gains, can affect your tax status — so if you start a rental property business or you’re making bank by driving for Uber on your off hours, you’ll need to check your W-4.

3. You Get a Hefty Refund — or Owe Uncle Sam

As nice as it is to see that pre-summer windfall, getting a refund basically means you’ve given the government a yearlong interest-free loan. You could have been putting that money to better use yourself during that time, particularly if you invested it and let it grow.

On the flip side, if you find out you owe money at tax time, adjusting your withholdings might keep you from desperately scrounging in the couch for spare change during your spring cleaning spree.

Need a cheat sheet? The IRS provides a handy tax withholding calculator tool, which can tell you whether your forms are in need of an adjustment. It’ll only take a few minutes, but you’ll want to gather your recent pay stubs and last year’s tax return before you get started.

FROM THE TAXES FORUM

How to Adjust Your Tax Withholdings

If you’ve determined you do need to adjust your tax withholdings, all you need to do is file a new W-4 with your employer. Many companies keep all their tax forms and documentation online, so you might not even have to put pen to paper.

Contact your employer’s HR department (or whoever’s in charge of tax documents and compliance) for specific instructions. And if your adjustments do mean you get to keep more of your paycheck, don’t just blow it! Use it to start an emergency fund, or stick it in an interest-accruing retirement account for later.

See? That wasn’t so hard or time-intensive. Now, as far as that new baby, house or marriage is concerned… you’re on your own.

Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool, Roads & Kingdoms and other outlets. Learn more at www.jamiecattanach.com.