How Do I Know If I'm Taking Enough Federal Taxes Out of My Pay Check?

by W D Adkins ; Updated December 08, 2017
The IRS says

The Internal Revenue Service makes most employers withhold federal taxes from employee paychecks. This makes sense, because you pay a little of your taxes each payday and don’t get slammed with a fat tax bill when you file your tax return. However, if you get a big refund check every year or if you wind up paying more when tax time comes around, your employer may not be withholding the proper amount. The good news is that you have some control over how much in federal taxes is taken out of your paycheck.

Review Your W-4

Your boss gives you a W-4 form to fill out when you are hired. On the W-4, you enter your marital status, the number of withholding allowances you can claim and other information an employer needs to figure payroll tax withholding. From time to time, you need to review your W-4 and update it based on changes such as the birth of a child, marriage or shifts in your income. The IRS says to submit a new W-4 within 10 days of when changes occur. Complete the worksheet that comes with the W-4 to determine if you are having enough federal taxes taken out of your paycheck.

How Withholding Allowances Work

Each withholding allowance is a deduction your employer subtracts from your gross wages before figuring how much income tax to take out. The annual value of one allowance is $4,050 as of the 2017 tax year. If you are paid weekly, this works out to a reduction in the earnings that are taxed of $4,050 divided by 52, or $77.88 per week. When you add an allowance, less income is taxed and less money is taken out of your paycheck. Claiming the right number of allowances based on the W-4 worksheet is the key to having enough federal tax withheld.

Handling Extra Jobs

You may have a second job or a spouse who works. Extra jobs can easily result in too little tax being taken out of your paycheck. The IRS says there’s a simple way to fix this problem. Lump all of the jobs together and figure the allowances using one worksheet. Then divide up the allowances among the jobs. Suppose you and your spouse work. You combine both jobs on a single worksheet and come up with four allowances. If you and your spouse each claim two allowances, you should have the right amount of tax withheld.

Non-Wage Income

Suppose you have income from sources such as interest earnings, stock dividends or self-employment. It’s all taxable and can leave you with a hefty tax bill. To avoid this, the IRS suggests claiming fewer withholding allowances than you are entitled to according to your W-4 worksheet. Another option is to use your W-4 form to ask for extra tax to be withheld each payday. If it looks like you’ll still owe Uncle Sam $1,000 or more at the end of the year, the IRS says you are supposed to file an estimated tax return each quarter and pay the amount of tax due.

About the Author

Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

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