Tip #1 - Control Your Payroll Taxes - Update Your Form W-4

Good morning!

Grab your mocha and enjoy.

This is tip #1 of nine tips I’m sharing over the next nine weeks. I hope you find something useful!

Even working as a CPA and payroll tax professional, my personal taxes threw me a few surprises over the years.

Usually in a frustrating way - owing a nice amount to the tax collectors - but even in unexpected large refunds which made it easy to spend too much.

I survived and wasn’t severely impacted by already having some good financial habits (savings to pay the tax bill, setting aside a large portion of refunds for financial goals), but many may not be in the same position.

With time I learned to avoid the annual tax bills and better plan for smaller refunds. In summary, being more intentional with my money…even my tax money.

How?

TIP #1 - Update your Form W-4 at least once a year.

It’s a bit of work, and the IRS likes to complicate it as much as possible, but updating your W-4 once a year is worth 30 minutes.

Regularly reviewing my W-4 elections allows me to balance my monthly expenses and stay stress-free during tax time.

I don’t have to worry about fluctuating income or expenses; I can better plan and set up automatic systems for my finances.

If you owe money this next month, then:

1. Update your W-4, or

2. Better plan and estimate your annual taxes, setting aside money for the annual bill.

One of these sounds a LOT easier to me, and I’m all about making this as easy as possible.

If you are excited about spending your large tax refund, then:

1. Update your W-4 (you’re less likely to spend it all if it’s part of your monthly plan), or

2. Apply at least 20% of the refund toward your financial goals. Even if you spend the rest, at least you’ve continued to make progress for your future.

It’s easy to spend the money if it comes as one big payment, instead get it into pieces by increasing your income per paycheck.

I recommend updating (or at least reviewing) your W-4 withholdings twice a year - once after completing your tax return and the second after you receive any large wage increases or performance bonuses.

In the next 30 minutes…

Pull a copy of your recent 2023 pay slip and a copy of your 2022 tax return, then go out to the IRS W4 Calculator.

Complete the form (yeah it’s a pain, but also painfully accurate - thanks, IRS).

In the end, you have a completed Form W-4 you can use with your HR/Payroll Department (or your employer’s employee self-service portal).

Remember, intentional money equals intentional life.

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I hope you all have an amazing week!

Quinn