Your Financial and Tax Health: Watching Your Paycheck
While a tax bill is inevitable for some filers, the reality is that many of these liabilities could have been avoided. In this part of our financial health series, we’ll take a look at one of the more common pitfalls many taxpayers fall into: not looking at their paycheck.
Back in the day, it was pretty easy to look at your check. After all you got handed one every week that you would then take to the bank. If something wasn’t right, you would notice pretty quickly. With most payroll checks being direct deposited these days, it’s fairly common to only have a vague idea of what’s being subtracted from your income. Ignoring the numbers on your check may save you time on a busy Friday afternoon, but it is not the smartest thing to do.
At some point early in their employment with a company, an employee will be required to fill out a form W-4. This form basically tells the employer how much federal and state tax to withhold from the paycheck. Although it’s only a one-page form, it can be confusing. To add to the madness, the IRS has completely revised the W-4 Form for this year. Here is an FAQ from the IRS so you can get up to speed on the changes. Pay careful attention to the form and be sure to fill it out carefully. If you have questions, contact your Human Resources department.
There will usually be other deductions from your check as well, such as those for retirement savings and for health care. Make sure you thoroughly understand what is being taken out and why. Some of those numbers can make a big difference at tax time. If you don’t like what you’re seeing, don’t hesitate to make changes. If you do it early enough in the year, you still have time to make a difference.
It’s your money. Keep track of it by watching your paycheck.