Are You Withholding Enough from Your Paycheck? Here's How to Check!
- donnablackwelloffi
- Apr 3
- 2 min read
Managing your finances involves more than just budgeting and saving; it also means ensuring that enough taxes are withheld from your paycheck throughout the year. Under-withholding can lead to unpleasant surprises come tax season, including potential penalties. Here's a simple guide to help you assess your withholding and avoid any pitfalls.
How to Check Your Withholding
Grab Your Latest Paystub: To get started, you'll need your most recent paystub. This document contains all the necessary details about your earnings and withholdings.
Calculate Your Withholding Percentage: Find your year-to-date (YTD) federal withholding amount on the paystub and divide it by your gross wages (total earnings before deductions). This calculation will give you a percentage that represents how much of your income is being withheld for federal taxes.
Evaluate Your Percentage: Compare your withholding percentage to your federal tax rate bracket. If your withholding percentage is lower than your tax rate, you might not be withholding enough.
Why Withholding Enough is Crucial
Under-withholding can lead to a tax bill during filing season. The IRS expects taxpayers to pay their taxes as they earn income throughout the year. If you haven't withheld enough and owe more than $1,000 at tax time, you may incur an underpayment penalty. This penalty can add an extra financial burden, making it crucial to withhold the right amount.
Avoiding Under-withholding
Adjust Your W-4: If you find that you're not withholding enough, you can adjust your W-4 form with your employer. This form lets you specify the amount of federal income tax to be withheld from your paycheck.
Use the IRS Withholding Calculator: The IRS offers an online withholding calculator to help you determine the correct amount of taxes to withhold. It's a handy tool to ensure you're on track.
Consult a Tax Professional: If you're unsure about your withholding status, consider giving us a call at (615) 773-2736. Our tax professionals can provide personalized advice based on your financial situation.
Proper withholding is essential to avoid unexpected tax bills and penalties. By regularly reviewing your paystub and making necessary adjustments, you can ensure that you're meeting your tax obligations and avoiding financial stress in the future.