We would like to remind you that changes in tax regulations, as well as changes in your income or deductions, make it advisable to evaluate your W-4 status at least once a year. Your withholding can be adjusted as often as necessary, regardless of whether your employer requires a new W-4 form. Reasons to evaluate your withholding include the following:

 1. Your prior year’s federal or state tax return showed a large refund or a large balance due with the return.

 2. You or your spouse has changed jobs, resulting in an increase in income.

 3. There has been a significant change in your investments.

 4. You refinanced the mortgage on your home.

 5. You bought a new home, or now rent, instead of own your home.

 6. There has been a change in your dependents.

 7. You or your spouse have retired.

 8. You have taken distributions from an I.R.A. or pension plan.

 9. You expect large capital gains (or losses).

 10. You started a new business (sole-proprietorship).

Although most employers request only the federal form W-4, you can complete a different state form, such as California form DE-4, which allows you to claim a different withholding status for state tax purposes. Because of differences in state regulations, many taxpayers find that using their federal status, for state purposes, results in an underpayment of state taxes.

Remember that your W-4 or DE-4 exemptions can vary from the number of dependents claimed on your tax return, and less tax will be withheld as you increase the number of exemptions on form W-4. For example, you may be married and have three children, for a total of five exemptions on your tax return. Your W-4, however, may claim seven exemptions, if you have sufficient deductions to justify lower withholding, or only three exemptions, if you have other income from which there is no withholding, such as interest, dividends, rental income, or unemployment compensation.