Withholding: About Your W-4
Withholding is the amount of taxes that are taken from your paycheck based on factors such as whether or not you are married, have children, or have multiple jobs. It makes sense to take a few minutes to make sure that what is being withheld from your paycheck matches your actual tax liability. If you're having too much tax withheld, that's money you can't use until you get your refund. If you're not having enough withheld, you will owe tax at the end of the year, and you may even have to pay a penalty. Generally, a penalty will apply if your withholding and estimated tax payments total less than 90 percent of your current year's tax liability and less than 100 percent of the previous year's tax.
Reasons to Recheck Your W-4
You should pay particular attention to your withholding if you received a big refund check this year or if you had to make a tax payment that was more than you could comfortably pay. Also check your withholding if you had a significant change in your life this year, like marriage, divorce, birth or adoption of a child, purchase or sale of a home, or retirement. There is a good chance you're not having enough withheld if you have more than one job, if your spouse works, if you have income not subject to withholding, such as rent, dividends, interest or capital gains, or if you owe other taxes like self-employment or household employment taxes.
How to Find Out if You Are Withholding Enough
Need help in figuring out whether you are withholding enough? You can review How Do I Adjust My Tax Withholding? (IRS Publication 919). You can also use the IRS Withholding Calculator. With the help of current pay stubs and a copy of last year's tax form, you can check to see if you are withholding the right amount, then use the calculator results to fill out a new Form W-4.
How to Adjust the Amount of Withholding
You can adjust the amount being withheld from your paycheck by submitting a new Form W-4 to Payroll Services.
