How to avoid a tax bill each year?
To avoid a tax bill, you must pay your taxes throughout the year. You can set this up by updating your form W-4. This can be done by your payroll department.
- Go to your payroll department and tell them you want to edit your form W-4
- In box 4(c) on your w-4 form, enter the dollar amount you want to have taken out each paycheck
- To calculate the dollar amount, you must multiply your total paycheck by 10% or 12%. We recommended 12%. Example, if your total paycheck is $200, you need to multiply it by 12% which gives $24. This is the amount to write in box 4(c) on your form W-4. This will tell your employer to remove $24 from your paycheck to go towards your federal income tax. This will happen every time you get paid. At the end of the year, the total amount paid will be listed on your form W-2 in box 2, Federal taxes withheld.
- Submit your changes
Once you complete these steps, you are all done!