Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

IRS YouTube Video: IRS Withholding Calculator: English | Spanish

IRS encourages taxpayers to consider checking their tax withholding, keeping in mind several factors that could affect potential refunds or taxes they may owe in 2018.

Reviewing the amount of taxes withheld can help taxpayers avoid having too much or too little federal income tax taken from their paychecks. Having the correct amount taken out helps to move taxpayers closer to a zero balance at the end of the year when they file their tax return, which means no taxes owed or refund due.

During the year, changes sometimes occur in a taxpayer’s life, such as in their marital status, that impacts exemptions, adjustments or credits that they will claim on their tax return. When this happens, they need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificate, to change their withholding status or number of allowances.

Employers use the form to figure the amount of federal income tax to be withheld from pay. Making these changes in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December.

The withholding review takes on even more importance now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns could face additional review time next year.

So far in 2017, the IRS has issued more than 106 million tax refunds out of the 142 million total individual tax returns processed, with the average refund well over $2,700. Historically, refund dollar amounts have increased over time.

Making a Withholding Adjustment

In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from their employee’s pay.

The IRS offers several online resources to help taxpayers bring taxes paid closer to what they owe. They are available anytime on IRS.gov. They include:

Self-employed taxpayers, including those involved in the sharing economy, can use the Form 1040-ES worksheet to correctly figure their estimated tax payments. If they also work for an employer, they can often forgo making these quarterly payments by instead having more tax taken out of their pay.

2 comments to Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

  • wwolfson

    Good article!

    Has some one out there written a guide for how Chapter 13 debtors might report and account for the real property tax and interest portions of their Chapter 13 trustee payments in mortgage default cure plans?

    This would be invaluable for my clients in preparing post petition Chapter 13 tax returns.

    It will also increase refunds or reduce withholding pay roll taxes. More income means plan payments are faster and easier for debtors.

  • cathymoran@gmail.com

    I have not written anything, but I tell clients to access the trustee’s web site, make a copy or better yet PDF of what they find, and save that info to support claiming taxes, interest, and business expenses paid through the trustee. I haven’t had any client report back that they’ve gotten push-back from IRS.

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