W-4 Tax Withholding | FAQs
Federal income tax in the U.S. is a pay-as-you-go tax, which means that you must pay tax as you earn or receive income. There are two ways you can pay as you go:
Have tax withheld from your paycheck or other income
Make estimated tax payments
In this post, we'll talk about the first option.
How do I withhold tax?
If you're an employee then you most likely already have tax withheld from your paycheck. Three factors go into how much your employer will withhold from your paycheck:
The amount you earn in each payroll period
Your payroll period
The information you provide on Form W-4
Form W-4, Employee's Withholding Certificate
Form W-4 is used to help your employer determine how much they need to withhold from your paycheck. You will be given this form when you start a new job and you should also review it every year to ensure the information is still accurate. Information you will be asked include:
Your filing status
If you hold more than one job at a time
If you plan to file a joint return and your spouse also works
If you have dependents
If you plan on claiming credits
If you would like to make other adjustments for other income
How do I check how much I am having withheld?
You can check how much tax you're having withheld by looking at your pay stub. Your employer is required to provide information on federal, social security, and Medicare tax withholdings for the pay period and the year-to-date. To check if this is the correct amount you should have withheld from your paycheck, you can use the Tax Withholding Estimator on the IRS website.
What happens if my withholding is incorrect?
If you are having too much tax withheld, then you will end up with a larger refund when you file your tax return. It's up to you whether you would like a bigger refund when you file your tax return or if you would like to decrease your withholding and receive the extra income on your paychecks.
When you have too little withheld, you will have to pay the remaining balance when you file a tax return. Generally, if you owe more than $1,000 in tax when you file a tax return, you will have to pay a penalty for underpayment. You can typically avoid this penalty by withholding at least 90% of the tax for the current year or 100% of the tax shown on your return for the prior year, whichever is smaller.
How do I change my withholding?
If you need to make adjustments to your withholdings, either during the middle of the year or at the start of a new year, then you will need to fill out a new Form W-4 and give it to your employer.
Some reasons you may need to change your withholding include:
Change in filing status
Birth or adoption of a child
Purchase of a new home
Retirement
Change in job or income
Change in the amount of taxable income not subject to withholding
Change in the amount of adjustments to income
Change in the amount of itemized deductions or tax credits
When you submit your new W-4, your employer is required to apply the changes by the first payroll period ending on or after the 30th day after the day you gave it to them.
Have questions about your withholding?
Our tax preparers are here to help! Give us a call at (360) 922-0235 and we can explain how different life situations may affect your taxes.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or visit the additional resources below to see how this information may apply to you.
