LT Brad Hanover, CPA, CGFM, Deputy Comptroller, CG FINCEN (dc)
Within Direct Access, members may change their allowances for federal tax withholding under Tasks/W-4. Common reasons for members to use this tool is after marriage or birth of a child. We should counsel members prior to using this tool, as changes can have significant impacts on their federal tax withholdings. Changes should not be considered lightly, and members should seek guidance before making changes.
If not used correctly, this can result in too little taxes held from their pay and end up owing federal tax. This situation most often occurs when members select two allowances (themselves and spouse) and both work. The withholding amount is calculated based on expected pay, number of dependents, the tax withholding requirements from the IRS and your state of legal residence, and changed automatically such as when serving in a Combat Zone Tax Exemption area.
You can adjust your tax withholdings based on that information to make sure enough is withheld each year, or to make sure the Service is not withholding too much. Online, the IRS has a site to assist with calculating tax withholdings. Link: http://www.irs.gov/Individuals/IRS-Withholding-Calculator.