Everyone should do an annual check of their withholding using our updated DIY Paycheck Withholding Calculator. This year is even more important, especially for taxpayers who:
- Work two or more jobs or only work for part of the year.
- Received large tax refunds or had large tax bills for the prior year.
- Have older dependents, including children age 17 or older.
- Have children and claim credits such as the Child Tax Credit.
- Belong to a two-income family.
- Itemized deductions on their prior year’s tax returns.
- Earn high incomes and have more complex tax returns.
Changes in personal circumstances can reduce withholding allowances a taxpayer is entitled to claim.
Taxpayers whose circumstances have changed, including those:
- whose child no longer their dependent,
- started a second job, or
- who have divorced,
have 10 days to submit a new Form W-4 to their employer. It’s very important to claim the proper number of withholding allowances.
Taxpayers who work seasonal jobs or are employed part of the year should also perform a “paycheck checkup.”
Any changes that a part-year employee makes to their withholding can affect each paycheck in a larger way than employees who work year-round.
THIS MEANS THAT… Doing a checkup can help protect against having too little tax withheld and facing an unexpected tax bill and even a penalty at tax time. Using the DIY Paycheck Withholding Calculator is a no-brainer.
Some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks. However, this will reduce their tax refund next year.
More information on the Withholding Calculator is available in the Withholding Calculator Frequently Asked Questions page.
Step-by-Step Instructions for Using the IRS Withholding Calculator
The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.”
The objective of the withholding calculator and the worksheet are to get the tax liability and withholding as close to equal as possible.
The results should show a minimal refund or tax owed.
Results from the calculator will include a recommendation.
Some taxpayers might consider submitting a new Form W-4, Employee’s Withholding Allowance Certificate, to their employers.
So it will either reduce or increase the amount of their withholding.
In general, if you follow the recommendation and file a new form W-4 for the rest of the year – or for next year – your withholding will approximately equal your anticipated tax, and any refund or tax owed should be less than $25.
Before beginning, taxpayers should have a copy of their most recent pay stub and tax return.
Here are step-by-step instructions for using the calculator:
Time needed: 15 minutes.
How to Make Sure the Correct Amount of Taxes is Being Taken Out of My Paycheck
- Go to the main Withholding Calculator page on IRS.gov.
- Carefully read all information and click the blue Withholding Calculator button.
- Use the buttons at the bottom of each page to navigate through the calculator.
The buttons allow users to continue inputting their information, reset the information on that page, or start over from the beginning.
- Input general tax situation information, including:
Whether anyone can claim the user as a dependent.
Total number of jobs held during the year.
Contributions to a tax-deferred retirement, cafeteria or other pre-tax plan.
Scholarships or fellowship grants received that are included in gross income.
Number of dependents.
- Next input information about credits, including:
Child and dependent care credit.
Child tax credit.
Earned income tax credit.
- Enter the total estimated taxable household income expected during the year.
Amounts the user will enter include wages, bonuses, military retirement, taxable pensions, and unemployment compensation.
- Users should enter a “0” on lines asking for amounts that don’t apply to them.
The calculator will not let you move on unless you enter something.
- Enter an estimate of adjustments to income, including deductible IRA contributions and education loan interest.
- Indicate standard deduction (SD) or itemized deductions. Users who plan to itemize will enter estimates of these deductions.
SD for singles is $12,000, MFJ is $24,000, HoH is $18,000
- Print out the summary of results.
Make sure to print double sided to save paper 😉
The calculator will provide a summary of the taxpayer’s information.
Taxpayers can use the results to determine if they need to complete a new Form W-4, which they give to their employer.
The Withholding Calculator can also help taxpayers with part-year employment estimate their income, credits, adjustments and deductions more accurately and check if they have the right amount of tax withheld for their financial situation.
The calculator asks about the dates of a taxpayer’s employment and accounts for a part-year employee’s shorter employment rather than assuming that their weekly tax withholding amount would be applied to a full year.
The calculator makes recommendations for part-year employees accordingly.
If a taxpayer has more than one part-year job, the DIY Paycheck Withholding Calculator can account for this as well.
The Form W-4 worksheets do not distinguish between part-year jobs and full-year jobs.
Updating Form W-4 After Doing a Paycheck Checkup.
Taxpayers who use the calculator and determine that they need to change their withholding must fill out a new Form W-4, Employee’s Withholding Allowance Certificate.
Employees submit the completed Form W-4 to their employers. Do not send Form W-4 to the IRS.
Here are a few things for taxpayers to remember about updating Form W-4:
- The DIY Paycheck Withholding Calculator will help determine if they should complete a new Form W-4.
- The calculator will provide users the information to put on a new Form W-4.
Taxpayers who use the calculator to check their withholding will save time because they don’t need to complete the Form W-4 worksheets.
The DIY Paycheck Withholding Calculator does the worksheet calculations.
As a general rule, the fewer withholding allowances a taxpayer enters on Form W-4, the higher their tax withholding. Entering “0” or “1” on line 5 of the W-4 instructs an employer to withhold more tax.
Entering a larger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
Taxpayers who complete new Form W-4s should submit it to their employers as soon as possible.
With withholding occurring throughout the year, it’s better to take this step sooner, rather than later.
THIS MEANS THAT… Using the DIY Paycheck Withholding Calculator can help you adjust your W-4 to possibly avoid an unexpected tax bill or penalty.
If you need any help adjusting your W-4, go to https://www.authoritax.com/contact