Researching different reason why an employee may choose to alter his/her number of federal withholding allowances. Next, write a paragraph of at least five sentence, in which you identify and discuss the two most compelling reasons you identified for reducing the number of allowances. Then, write a second paragraph of at least five sentences, in which you identify and discuss the two most compelling reasons you identified for increasing the number of allowances.
To research the reasons why an employee may choose to alter their number of federal withholding allowances, you can start by consulting reliable sources such as government websites, tax experts, or payroll professionals. These resources provide up-to-date and accurate information on the subject matter.
One compelling reason an employee may choose to reduce their number of allowances is to ensure they have enough taxes withheld throughout the year to avoid owing a significant amount come tax time. By reducing their allowances, they can increase the amount taken out of each paycheck for federal taxes, reducing the likelihood of owing a large lump sum at the end of the year.
Another important reason for reducing the number of allowances is for those individuals who have had significant life changes that affect their tax situation. For example, if an employee gets married, has a child, or starts earning additional income, they may want to decrease their allowances to accurately reflect their current financial situation. This ensures that the right amount of taxes is withheld, taking into account any additional tax obligations or deductions they may now have.
On the other hand, an employee may choose to increase their number of allowances for a few compelling reasons. One reason is if they are consistently receiving large tax refunds each year. By increasing the number of allowances, they can have less tax withheld from their paycheck, resulting in a higher take-home pay throughout the year. This can be especially beneficial for individuals who want to have more money available in their budget rather than letting the government hold onto it interest-free.
Another compelling reason to increase the number of allowances is if an employee anticipates specific tax credits or deductions throughout the year. For instance, if an employee expects to receive the Child Tax Credit or has significant deductible expenses, increasing the allowances can reduce the amount of tax withheld, allowing them to benefit from those tax breaks throughout the year instead of waiting for a refund.
Remember to consult with a tax professional or utilize reliable sources to verify the accuracy and relevance of these reasons, as individual circumstances and tax laws can vary.