Did you receive a large tax refund or have to pay additional income taxes?
Neither situation is ideal. It’s nice to receive a large refund at year-end, but that only means that you have given the US government an interest-free loan for a year. Wouldn’t you rather have the cash during the year? If you owe money and have not paid in enough during the year, you could be subject to an underpayment penalty and interest charges. The IRS website has an online calculator that can help you achieve the goal of having your withholding as close to you eventual tax bill.
Go to: www.irs.gov/individuals/article/0,,id=96196,00.html or put “2011 IRS Withholding Calculator” in your favorite internet search engine.
You will need your most recent pay stubs and your most recent income tax return handy.
Once your new withholding allowances have been determined, you will need to fill out a new W-4 and submit it to your employer.
If you are subject to alternative minimum tax, self-employment tax or other taxes; or if any of your current jobs will end before the end of the year, you will achieve more accurate withholding by following the instructions in Publication 919, How Do I Adjust my Tax Withholding?