Just One Thing for May

Feeling like you’re constantly playing catch-up with your finances? We get it. That’s why we’re focusing on Just One Thing each month to help you build a stronger financial foundation.

This month’s move: reviewing and updating your W-4. With tax season just barely in the rearview mirror, now’s the perfect opportunity to fine-tune your paycheck withholdings. Think of your W-4 as your budget for tax withholdings throughout the year; it tells your employer exactly how much federal income tax to set aside from each paycheck. Getting this dialed in means fewer tax-time surprises.

Did you end up with a big refund this year? Awesome, but it also means you essentially gave the IRS an interest-free loan. Or maybe you owed a hefty sum? That signals you likely under withheld during the year. Major life changes like marriage, a new baby, or a job switch are prime reasons to give your W-4 a fresh look. If your recent tax experience wasn’t as smooth as you’d like, a quick W-4 update could be overdue.

Freelancers and 1099 earners: the W-4 doesn’t apply to your situation since you’re your own boss when it comes to withholdings. Remember, you’re responsible for making estimated tax payments each quarter. The IRS offers some helpful resources to estimate your tax obligations and stay on track.