The IRS urges everyone to complete a paycheck checkup to make sure they are withholding the right amount of tax from their paychecks.
You can check out the IRS Tax Withholding Estimator to help navigate the complexities of multiple employer tax situations and determine the correct amount of tax for each employer to withhold.
If you have a more complex tax profile — for example, if you are a two-income family or if you work multiple jobs — you may be more vulnerable to being under- or over-withheld. This is why the IRS encourages a paycheck checkup as early as possible.
If you need to adjust your paycheck withholding amount, doing so early gives more time for withholding to take place evenly throughout the year. Waiting means fewer pay periods to make tax changes. This could have a bigger effect on each paycheck.
The Tax Withholding Estimator at https://www.irs.gov/individuals/tax-withholding-estimator allows you to enter income from multiple jobs or from two employed spouses and ensures that you apply your 2022 tax deductions, adjustments, and credits only once rather than multiple times with different employers.
Of course, the Withholding Estimator's results depend on the accuracy of information entered and may not take your entire tax situation into account. It is always best to consult your tax professional.
Know your W-4 form
Submit your new Form W-4 to your employer as soon as possible if you have withholding changes. There is an updated Form W-4 with instructions for 2022 available at https://www.irs.gov/forms-pubs/about-form-w-4.
You typically prepay your taxes during the year through withholding from a job via estimated quarterly tax payments if self-employed or both. Not having enough tax withheld can occur when you get married or divorced, have a baby, or have a change in dependents living at home. One of the most common under-withholding situations is the second-job scenario. Be sure to take into account second jobs and other income sources, so there are no unpleasant surprises next April.
Determining accurate withholding can be tricky, so talking to your tax professional is always a good idea.
For more information about the above article or other individual tax services, contact Tracey C. Strickland, CPA, EA, at (334) 887-7022 or by leaving us a message below.
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