Finding Strategies That Work When It Comes To Answering W4 Questions

Naturally enough, when it comes to filling out tax return forms, people would always want to find the best strategies to answer the questions quickly and painlessly. This is the same case when it comes to answering 1040 or W4 questions. However, simply ticking off boxes or randomly assigning 0 and 1 is not the way to best declare your financial liability.

There are two main strategies you can use if you want to determine how much tax liability you should declare for the incoming working year.

One: you make a detailed list of all your ongoing money making ventures. This can include current investments, ongoing home based business, possible earnings from saving accounts, and of course your current wages. Now comes the tricky part. You need to make a projection on how much you think you will be earning from these in the coming months. From there, you can base your tax liability. However, this strategy is full of pitfalls. For one thing, no one can accurately predict how much money can be earned from any form of investments – even if these seem to be quite stable. Even the most conservative or generous estimations can leave you paying too little or too much withholding tax. And these may still earn you penalties in the end.

Two: you could simply choose to pay 100% or 110% of the tax liability amount your paid from last year’s W4 or 1040 form. If you had an annual income last year of under $150,000, and you are not expecting any changes in financial, civil or legal status for this year, it would be safe to declare 100% tax liability. However, paying an additional 10% more will give you the leeway for avoiding future penalties should some unexpected changes happen for the incoming year.

December 18 2008 03:25 am | W4 tax Form

One Response to “Finding Strategies That Work When It Comes To Answering W4 Questions”

  1. What is meant by W-4? | W4 Questions Says:

    […] is Form W-4? Form W-4, the Employee’s Withholding Allowance Certificate for federal withholding, is used to decide the […]

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