How Do I Know I Have the Right Tax Withholding?
When was the last time you took a look at your tax withholding? The IRS recommends that everyone check their withholding regularly to avoid an unexpected tax bill or penalty. Especially because major changes from the Tax Cuts and Jobs Act could affect the size of your refund this year. So how do you check your withholding? What do you do if you find you need to make a change? Let’s talk about it!
When should I check my tax withholding?
The IRS recommends you do it at least once a year. You may need to do it more often if you have life events that will affect our taxes. Examples of those events would be, someone in a two-income family getting a second job, or a dependent turns 18 years old. It would also be wise to take a look at your tax
How do I check my tax withholding?
You can either check with your tax preparer or use the tax withholding estimator tool on the IRS website.
The tax withholding estimator works by estimating your federal income tax withholding. You can then see how your refund, take-home pay, or tax due are affected by the withholding amount. Having this information will then help you estimate a withholding amount that works for you.
To use the tax withholding estimator you will need to have a few things ready.
What You Need
- Paystubs for all jobs (spouse too)
- Other income info (side jobs, self-employment, investments, etc.)
- Your most recent tax return
Please note. The IRS recommends that you do not use this tool if any of the following applies to you.
- You have nonresident alien status. Use Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens.
- Your tax situation is complex. This includes alternative minimum tax, long-term capital gains, or qualified dividends. See Publication 505, Tax Withholding and Estimated Tax.
What do I do if I need to make an adjustment to my tax withholding?
If after seeing the results from the tax withholding estimator you want to make some changes simply download a new W4 from the IRS website. Use the IRS suggestions to fill out your W4 to get the estimated outcome you would like. After you have the new W4 completed send it to your employer to have them make the necessary adjustments.
Taking the time to look this over will help you know what to expect when tax time comes around. No one likes thinking they are going to be getting a refund & then finding out they owe the IRS. Still have questions on how the tax withholding estimate works? Check out this FAQ page.
Written by Harley VanDyke
Harley joined Superior Trucking Payroll Service (STPS) in early 2019. With nine years of customer service experience, she truly understands what it takes to make our clients happy. She loves working at STPS because of the family-like atmosphere. Harley’s favorite place to be is Traverse City, Michigan or anywhere that has hippos.
[form id="8639" /]