How to Adjust Your Tax Withholding

You may not have thought much about the forms you filled out on your first few days in a new job. But you likely filled out a W-4 form, which helps to determine how much of your income your employer will withhold, or keep from your paycheck for federal taxes.

Having too much tax withheld can mean smaller paychecks, but a bigger tax refund. Too little tax withheld could mean owing a bill at tax time.

It’s about getting just the right amount. “A tax refund is not necessarily a good thing, especially if it’s huge,” says Rob Williams, managing director of financial planning, retirement income and wealth management at Charles Schwab. “I know it feels nice, but it just means you’ve given a no-interest loan to the federal government.”

Even if your withholding amount was right at one point, your needs may change. Form W-4 asks questions to help you get it right, but it doesn’t account for changes in your life.

[Read: What’s My Tax Bracket?]

When Should I Adjust My Withholding?

Even if you’ve already filled out a W-4 form, you can adjust your tax withholding at any time throughout the year.

There are a few events that should trigger a tax withholding checkup, including:

— Getting a very large tax refund.

— Getting married and filing jointly.

— Getting divorced and filing as a single person instead of a joint return.

— Having a child or taking on an adult dependent, like a parent.

— Starting a side hustle or a second job.

“Life events like getting married, having a child, maybe you get a second job or you start a side hustle — those things could all potentially change what your tax liability is,” says Robert Farrington, founder of The College Investor, a personal finance site. A boost in earnings due to a raise or bonus should also be a reason to check your withholding amount.

If you work remotely, pay close attention to your W-4. “If remote workers change states or if they’re working in a different state from their employer, those are all important things to review and look at the withholdings,” Williams says.

When Should I Decrease My Withholding?

If you regularly receive a large tax refund, you might consider decreasing your withholding amount. This way you’ll get more money in your regular paycheck instead of at tax time.

That’s not to say that it’s a good idea to lower your withholding entirely and plan to pay it back at tax time. “Generally speaking, reducing your tax withholdings because you’re having tough times is not the best financial planning practice,” Williams says. It could lead to penalties for your withholding being too low.

A good way to check to make sure you’re withholding enough is through the IRS’s Tax Withholding Estimator.

[READ: 15 Tax Questions Answered.]

When Should I Increase My Withholding?

If you owe taxes at the end of the year, consider increasing your withholding.

One reason people choose to increase withholding is to use it as a kind of forced savings.

While some financial experts see extra tax withholding as a negative thing, it doesn’t have to be. “I really don’t have a strong opinion about some people who treat their tax refund as a forced savings,” says Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals. “Many times, that’s the money that pays for a vacation, or possibly real estate taxes or provides that forced savings, even though the government’s not giving you any interest on that.”

How Do I Adjust My Withholding?

First, use the IRS’s Tax Withholding Estimator tool to get an idea of whether you need to make changes in the first place. The tool will ask questions about your filing status, income sources, current tax situation and deductions you’re planning to take. To fill out the questions accurately, have a recent pay stub from your employer and a recent tax return — as well as your spouse’s, if applicable — on hand to answer the questions accurately.

The tool will give you information on your projected amount owed or expected refund. If you determine you need to change your withholding, you can adjust the amount in either direction by asking your employer’s human resources department if you can fill out a new W-4 form.

[READ: Legal Secrets to Reducing Your Taxes]

You’ll need some information to accurately fill out the W-4, including:

— Your Social Security number.

— Your address.

— Income information not from jobs (including things like rental properties and dividends).

— Income information from other jobs.

— Income information from your spouse.

— An idea of how many dependents you’re able to claim and any deductions you might take.

Fill out the form according to the IRS’s Withholding Estimator tool. If you have trouble, consult a tax professional or accountant for extra guidance.

More from U.S. News

Red Flags That Could Trigger a Tax Audit

15 Tax Questions Answered

How to Save Money: 10 Expert-Backed Ways

How to Adjust Your Tax Withholding originally appeared on usnews.com

Update 11/18/22: This story was previously published at an earlier date and has been updated with new information.

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