When you look at your paycheck, you’ll notice a portion is deducted for taxes. This is called withholding, and it’s essentially a prepayment of your taxes. While it will help pay your taxes, this is not the government or your employer directly taxing your income. How much is withheld is entirely in your control! Withholding covers:
- Federal income tax: Based on your earnings and the information you provide to your employer on Form W-4.
- Social Security and Medicare taxes: These fund essential federal programs.
Why Is Withholding Important?
The goal of withholding is to spread your tax payments throughout the year, so you don’t owe a lump sum at tax time. However, if you consistently get a large tax refund or owe a big amount, it may mean your withholding needs adjustment.
When Should You Adjust Your Withholding?
To ensure accurate withholding, submit a new Form W-4 to your employer if:
- You’ve experienced major life changes like marriage, divorce, or having a child.
- You frequently owe taxes or receive large refunds at tax time.
What If You Have No Withholding?
If you’re self-employed or have additional income not covered by payroll withholding, you’ll need to make estimated tax payments throughout the year. This helps you avoid IRS penalties and ensures your taxes are paid on time.
Stay on Track with Withholding and Taxes
Adjusting your Form W-4 or making estimated payments ensures you’re on track with your taxes and avoids surprises on Tax Day! Stay proactive and review your withholding regularly.
If you’re still unsure what withholding is, how the Form W-4 works, or how much you should withhold, contact us today! Schedule your consultation now to take control of your financial future!