Paying Alimony as a Means of Decreasing Your Withholding Tax

Wherever life may lead you, the IRS will continuously be at your back. If you get married, there are tax implications. When you get divorced, still there are tax implications. When you have a baby, get a new job, buy a home, or purchase an energy efficient car – all of these can affect your taxes. This article will examine how alimony can affect your withholding tax, as well as how you can get IRS assistance with any questions that you may have.

Paying federal income taxes can be done using any of the two: estimated tax or withholding tax. The self-employed usually utilize the estimated tax. “Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well,” describes the IRS. Employees, however, pay their taxes by withholding, meaning their employers withhold income tax from their monthly salaries. Whether taxes are taken from your job or other types of income like pensions, gambling winnings, bonuses and commission, they will always be filed under your name.

Your salary and specific data in your W-4 (including details on whether you are withholding at the single rate or the lower married rate, how many withholding allowances you can claim, and whether you want any additional income withheld) determine the amount that will be withheld from your pay. Making use of the IRS’ Withholding Calculator will make the calculation of your taxes less tedious.

Alimony adjustment, among others, is one way of changing your withholdings. How do you do this? You can simply accomplish a new W-4 and submit it to your employer to claim for adjustments in your withholding taxes.

Alimony payments are among those categorized as taxable income. Hence, you must accomplish a new W-4 if you are receiving these so this will be reflected as an increase in your income. Otherwise, you may end up owing more taxes at the end of the year.

On the contrary, being the one to pay for the alimony entitles you for a tax deduction. However, it should be paid through the following: in cash, through a check or through money order. If you directly pay certain bills in behalf of your ex-spouse, your expenses cannot be considered alimony. A newly filled out W4 is enough to record requests for tax deductions gained from paying alimony.

Your life changes ---- and some situations change more drastically in a year’s time. When they do come your way, do not forget to adjust the amount of income you have withheld from your paycheck.