- You probably completed a Form W-4 on the first day of employment. You choose the number of allowances you want to claim, depending on your status as a single or married taxpayer. You can also claim dependents or choose to have extra taxes withheld from your paycheck. When your employer prepares your check, accounting withholds an amount to cover your tax liability for that pay period. The employer sends the withheld amounts for all employees to the IRS, and the IRS credits your account by your Social Security number. Your employer provides a Form W-2 at the end of the year with your total income from that employment and the total tax paid.
- Your federal income tax return reconciles your taxes paid with taxes owed. You file a federal tax return after the new year for the previous year's taxes. If you do not have enough tax withheld, you owe the IRS at tax time. If you have more money withheld than your total tax liability, you may choose to get money back. You must prepare a federal income tax return to determine how much you get back, and you must file the tax return to get the amount overpaid returned to you.
- When you file your federal income tax return, if you have overpaid, you may choose what you want to do with the extra payment. You may choose a refund sent to your bank account. You may also choose to have the money applied to next year's taxes. Check the correct box to give the IRS instructions for handling the extra taxes paid.
- If you would like to use tax withholding as a way of saving money, you may ask your employer for a new Form W-4. Complete the form with fewer allowances than you have on file. If you have claimed yourself as married in the past, you can have more taxes withheld if you claim yourself as "married but withhold at the higher Single rate." You can also use Line 6 to request an additional amount withheld. Overpayment during the year will give you a refund when you file your federal income tax return.
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