Check Withholding to Avoid Underpayment or Overpayment of Tax

You may want to evaluate your W-4 withholding allowances for the year. If you received a large refund or paid underpayment penalties with your previous tax return, it may be an indication that withholding allowances need to be adjusted. Often an income or job change can affect the withholding allowances.

Avoid a surprise at tax time and check your withholding amount. Too little can lead to a tax bill or penalty. Too much can mean you won’t have use of the money until you receive a tax refund.

You can use resources to help determine your proper W-2 withholding allowances. You should review your current W-4. After reviewing you can visit the IRS.gov website and use their W-4 calculator.

Tax Withholding for Individuals

The federal income tax is a pay-as-you-go tax. You pay the tax as you earn or receive income during the year.

When to Check Your Withholding

  • Early in the year
  • When the tax law changes
  • When you have life changes:
    • Lifestyle - Marriage, divorce, birth or adoption of a child, home purchase, retirement, filing chapter 11 bankruptcy
    • Wage income - You or your spouse start or stop working or start or stop a second job
    • Taxable income not subject to withholding - Interest income, dividends, capital gains, self employment income, IRA (including certain Roth IRA) distributions
    • Adjustments to income - IRA deduction, student loan interest deduction, alimony expense
    • Itemized deductions or tax credits - Medical expenses, taxes, interest expense, gifts to charity, dependent care expenses, education credit, child tax credit, earned income credit

Change Your Withholding

To change your tax withholding, use the results from the Withholding Calculator to determine if you should: