Withholding is the process of having an employer deduct a portion of an employee’s income and pay it to the IRS on their behalf. The amount of withholding is determined based on the employee’s income and the information they provide on Form W-4, Employee’s Withholding Certificate. The employee’s filing status, additional income, deductions, and tax credits are factors that determine the withholding amount.
The IRS suggests that employees check their withholding especially if their refund is larger or smaller than expected. When there is a major life event, a change in income, or a change in tax law, employees should also check their withholding. The Tax Withholding Estimator tool on the IRS website can help employees determine if they need to submit a new Form W-4 to their employer. Taxpayers with a complex tax situation or nonresident alien status may need to use Publication 505, Tax Withholding and Estimated Tax.
To change the withholding, employees with wage income can use the results from the Tax Withholding Estimator to complete a new Form W-4 and submit it to their employer. Employers may use an automated system to submit the form, and taxpayers should check with their employer for instructions on how to submit a new form.
In conclusion, checking and adjusting the withholding amount is important for taxpayers to avoid a surprise at tax time. The IRS provides resources and tools for taxpayers to check their withholding, determine if a change is necessary, and make adjustments accordingly.
