Although you may be penalized for underpayment of taxes withheld, it is very easy to avoid if you are the average individual.
Assuming that nothing has changed from year to year (marriages, births etc) and you are making the same or more than last year, you can avoid penalties by taking your old tax return from the year before and finding the line that says "taxes owed" (line 63 on the 2006 1040).
If you pay 100% of the amount you paid in 2006, in 2007 you will be fine and, like I said, if nothing changes in your life and you make a little more than you did in last year you will probably end up paying a little at the end of the year with no penalty.
If you will make less this year or have life changes that will decrease your liability (another kid or other new tax breaks in your life), you will want to lower you taxes to no more than 90% of what you guess you will have to pay.
Adjusting your W-4 is easy and your payroll person can probably give you an idea of how much will be taken out of your check if you get the same amount of pay each period. Just ask your payroll or HR person for a new W-4 form or print it from irs.gov. Follow the directions and you should be golden.
If you have any questions, don't hesitate to ask.
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This is general information and as with any tax questions the answers will vary from individual to individual. See a tax advisor for specific advice about your situation.