When you start a new job, your employer will have you fill out an IRS W-4 Form. Many employees fill in the blanks, and never really think about the implications of what they put in the space asking for withholding allowance. That amount is very important in assuring that you are paying th correct amount of taxes.
If you are not having enough tax withheld, you will owe money to the IRS when you file your tax return. In order to lessen this burden, you should reduce the number of withholding allowances. You can do this at any time, just ask your employer for a new form. If you work at another job, your spouse has a full time job, or you have other income, you should review your W-4 form to see if you should reduce the number of withholding allowances. You want to avoid paying the IRS a large payment or even a penalty for underpaying during the year.
On the other hand, what happens if too much tax is being withheld from your salary? You will receive a refund when you file your taxes, but that may not be a good thing. Remember, that's your money the government is using during the year and you are giving the government an interest free loan. If you received a big refund last year, you may want to review your withholdings and update them to fit your present circumstances.
Your goal should be to break even. The best time to review your W-4 Form is early in the year. Also if you have had any life changing experiences such as the birth of a child, buying a new home, or you or your spouse retires, you will want to make changes to your withholding on Form W-4 to reflect those changes.
Form W-9 is the IRS form used by a company or business to request your taxpayer identification number. You may get a blank form W-9 to fill out if you or your business are hired to provide services to another company or business. Most often, Form W-9 is sent to independent contractors, consultants, and other self-employed workers.
By submitting Form W-9, you are certifying that the tax id number you are providing is correct and accurate. You also need to certify whether or not you are subject to backup withholding. Most taxpayers are exempt from backup withholding. The IRS might require backup withholding, however, if your name and tax identification number that you provide on the W-9 do not match the IRS records or if you owe outstanding federal taxes and the IRS has notified you that you are subject to backup withholding.