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How to Calculate Tax Withholding Correctly


Federal income taxes are handled on a pay-as-you-go basis, which means that taxpayers must pay taxes on what they earn as income during the year. Most do so by having their employers withhold a certain amount from their paychecks. Failing to withhold the right amount, however, could result in an unexpected tax bill. One of the best ways to avoid a surprise come tax season is for employees and those who collect pensions and annuities to periodically check their withholding amounts. Read on to learn more about why this is so important.

What is Tax Withholding? 

Employers withhold a certain amount of income tax from their employees’ paychecks and then pays those amounts on the employee’s behalf. At the end of the year, the employer will send the employee a Form W-2 showing how much that person received in wages and how much of those wages were withheld. How much is withheld from each paycheck, however, will vary based on:

  • The amount of income being earned; and
  • The information provided to the employer by the employee on Form W-4.

Among the details that employees must provide on their W-4 forms are their filing status, as well as information about any additional income. Employees cannot, however, merely specify a dollar amount for the employer to withhold.

The Importance of Checking Withholding 

The amount being withheld from an employee’s paycheck should be checked regularly, especially for those who receive a refund that is larger or smaller than expected. A marriage or divorce, an increase or decrease in wages, or even fluctuating deductions and credits could all affect how much is withheld from a paycheck. An employee who fails to account for these changes could end up owing a hefty tax bill to the IRS come tax time. To avoid this, taxpayers should be sure to check their withholding:

  • At the beginning of every tax year;
  • When there have been major changes in the federal tax code;
  • When they experience a lifestyle or financial change, such as marriage, divorce, the birth or adoption of a child, the purchase of a home, retirement, or bankruptcy;
  • When they experience a change in income;
  • When their taxable income isn’t subject to withholding, like income earned from self-employment or gig economy work; and
  • When calculating planned deductions and tax credits.

For help checking or changing your own tax withholding amount, feel free to reach out to our legal team today.

Call Dedicated Florida Tax Lawyer Ronald Cutler, P.A. Today 

If you forgot to check your tax withholding and are now facing responsibility for an unexpected tax bill, there are steps you can take to reduce and pay off that debt. To learn more, please call CPA, former FBI Special Agent, and experienced nationwide unfiled tax attorney Ronald Cutler, P.A. at 386-490-9949 today. We don’t charge for initial consultations, so don’t hesitate to call or contact us online to schedule your case review at your earliest convenience.