How to Reduce Tax Withholding

by Owen E. Richason IV ; Updated July 27, 2017
Tax withholding can be reduced by completing Form W-4

Items you will need

  • IRS Form W-4
  • IRS Worksheets 1 and 9

Tax withholding is the practice of deducting money from an employee’s paycheck and paying it directly to the Internal Revenue Service as a form of prepayment of federal taxes. An employee claims a number of withholding allowances on their W-4 form in order to raise or lower the amount of earned income withheld for taxes. To reduce tax withholding, an employee must increase their number of withholding allowances.

Step 1

Determine your federal withholding. Visit the IRS’s withholding online calculator (see "Resources"). This calculator will show an employee their federal tax bracket as well as their projected withholding. Alternatively, you can print IRS Worksheets 1 and 9 and use them to determine your federal withholding.

Step 2

Request IRS Form W-4 from your employer or print it directly from the IRS’s website (see "Resources"). On line 5 of Form W-4, fill in your number of withholding allowances based on the information calculated by the IRS’s withholding online calculator or Worksheets 1 and 9. Additionally, on line 6, you can have extra monies withheld. If you have elected this option before and are reducing your tax withholdings, leave it blank or write in “0”.

Step 3

Make a copy of your worksheets (if any) as well as a copy of your completed W-4, then return the completed W-4 to your employer. The changes generally approximately take two to six weeks to take effect.

Tips

  • Consider withholding extra from each paycheck by completing Line 6 of Form W-4 so you will not owe taxes at the end of the year.

Warnings

  • Lowering your tax withholding may give you more in your paycheck, but reducing your tax withholding too much will make you liable for owing more in federal taxes.

About the Author

Owen Richason grew up working in his family's small contracting business. He later became an outplacement consultant, then a retail business consultant. Richason is a former personal finance and business writer for "Tampa Bay Business and Financier." He now writes for various publications, websites and blogs.

Photo Credits

  • A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com