Learn how to ensure you receive the correct amount of refund or avoid a tax bill by adjusting your paycheck withholding. This article explains the process using a simple calculation and a helpful tool offered by the IRS.
If your federal tax refund or tax bill is more than expected, you may need updates to your paycheck withholding. There's a simple calculation to see if you're on track, or you can use a free tool from the IRS known as the tax withholding estimator. Typically, there's a refund when you overpay taxes throughout the year, and a tax bill when you don't pay enough. It's the employee's responsibility to tell employers how much federal tax to withhold from each paycheck via Form W-4 .
'It seems like a calculus problem,' said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida. But there's a 'quick and dirty' way to figure it out, he said. After filing your 2024 return, you can see your 'total tax' on line 24 on the second page of your filing. Next, you'll need to know how much you're withholding from each paycheck and how many pay periods remain for 2025 to see if you're on track, he explained. For example, let's say your 'total tax' was $10,000 for 2024. If there are 23 pay periods left in 2025, you'll need to withhold roughly $435 from each paycheck, Lucas said. To withhold more, you can resubmit Form W-4 with an 'extra withholding' added in the 'other adjustments' section of step 4, he said. However, you'll need to readjust your W-4 at the beginning of the next tax year. It should also be updated as your tax situation changes — like a bonus, second job, marriage, divorce, having a child, and more.'It's intuitive and it actually does a really good job,' he said. You'll also need pay stubs from all jobs (including your spouse) and most recent tax returns. But it won't be a good fit 'if your tax situation is complex,' according to the IRS
TAX REFUND PAYCHECK WITHHOLDING IRS FORM W-4 TAX ESTIMATOR
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