All taxpayers should review their federal withholding each year to make sure they’re not having too little or too much tax withheld.
Employees, retirees and self-employed individuals can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users, step-by-step through the process of checking their withholding, and provides withholding recommendations to help aim for their desired refund amount when they file next year. Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee’s Withholding Certificate.
Adjustments to withholding
Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don’t make any changes, they will likely owe additional tax and possibly penalties when filing their tax return.
Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction.
Either way, those who need to adjust their withholding must prepare a new Form W-4, Employee’s Withholding Certificate. They need to submit the new Form W-4 to their employer as soon as possible since withholding occurs throughout the year.
Individuals who should check their withholding include those:
- whose spouse is an employee
- who are working two or more jobs at the same time or who only work for part of the year
- who claim credits such as the child tax credit
- with dependents age 17 or older
- who itemized deductions on prior year returns
- with high incomes and more complex tax returns
- with large tax refunds or large tax bills for last year
If you have questions, contact Crosslin’s tax team at (615) 320-5500. We are here to help!