Adjustments to tax withholding may be the right move for those paying more than they owe.
Treasury Secretary Scott Bessent says taxpayers should adjust their tax withholding this year, which would put more money back into their paychecks.
With the Tax Day deadline passed, Bessent wants Americans to take advantage of new policies that could result in more money each payday. He encouraged taxpayers to get more out of this tax year by adjusting their withholding status.
“I want to encourage everyone out there watching today to change their withholding if they haven’t already done so,” he said during an April 15 White House press briefing recorded on C-SPAN.
According to USA.gov, tax withholding is the portion of a W-2 employee’s paycheck that is withheld and sent directly to the IRS to cover expected taxes owed. However, employees can adjust how much, if any, money is taken from their checks. This also depends on new life changes, such as having a child or holding multiple jobs.
“If you change your withholding, then you will get an automatic real wage increase … on a weekly or a monthly basis, and you will be able to keep more of your money this calendar year,” Bessent added.
While adjusters could see more money in the short term, this could come with its own drawbacks. With April as Financial Literacy Month, one should have an estimation of what they could owe next tax season.
If one received a higher-than-normal tax refund, it may make sense to lower their withholdings, even if no significant life changes occurred. However, they could run the risk of having a balance next season if they take back more than what Uncle Sam owes them.
However, taxpayers seeking to avoid overpayment can use the free IRS tax withholding estimator to estimate their expected taxes. While that can help employees make the best decision about withholding, it does not guarantee precise calculations, especially in more complex financial situations.
For those who don’t mind getting their money back at the end of tax season, they can skip out on the bigger paychecks, while also avoiding paying Uncle Sam further. On the other hand, those who could greatly benefit from keeping their money may find the adjustment worth any potential risk.
Source: Black Enterprise
