Check Your Federal Tax Withholding
The IRS Tax Withholding Estimator is an online tool that helps employees and retirees estimate whether enough federal income tax is being withheld from their paycheck, pension, or annuity. Reviewing your withholding can help reduce the chance of a large tax bill, unexpected refund, or underpayment penalty.
Succentrix Business Advisors helps individuals, small business owners, and S corporation owners in Boise and the Treasure Valley understand tax withholding, estimated tax payments, and year-round tax planning.
Use the official IRS Tax Withholding Estimator
What Is Tax Withholding?
Tax withholding is the amount of federal income tax taken out of your paycheck, pension, or annuity before you receive payment. The amount withheld is based on information provided on Form W-4 or Form W-4P.
If too little tax is withheld, you may owe taxes when you file your return. If too much is withheld, you may receive a larger refund, but your take-home pay during the year may be lower.
The IRS Tax Withholding Estimator can help you review your current withholding and determine whether a new Form W-4 or Form W-4P may be appropriate.
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Who Should Use the IRS Withholding Estimator?
The IRS Tax Withholding Estimator is generally designed for taxpayers who receive wages from an employer, pension income, or annuity income with federal income tax withholding. It can be especially helpful if your income or deductions have changed during the year.
You may want to review your withholding if you:
- Started a new job
- Changed jobs
- Got married or divorced
- Had a child
- Bought a home
- Started a side business
- Had a significant income change
- Received bonus or commission income
- Have multiple jobs
- Have a working spouse
- Owed tax last year
- Received a much larger refund than expected
The IRS recommends checking withholding every January and after major life changes. The estimator does not ask for personal information such as your name, Social Security number, address, or bank account information, and the IRS says responses are not saved if you close the browser window. (IRS)
What Information Do You Need?
Before using the IRS Tax Withholding Estimator, gather your most recent pay stub and information about income, deductions, credits, and taxes already withheld. If you are married filing jointly, you may also need your spouse’s income and withholding information.
Helpful information may include:
- Most recent pay stub
- Year-to-date wages
- Federal income tax withheld so far
- Expected income for the rest of the year
- Estimated deductions
- Child tax credit or dependent information
- Retirement contributions
- Other income sources
- Estimated tax payments already made
The estimator walks users through income, tax payments, adjustments, deductions, credits, and results. (IRS Apps)
What Happens After You Use the Estimator?
After you complete the IRS Tax Withholding Estimator, the results may help you decide whether to adjust your withholding. If a change is needed, the estimator may help generate information for Form W-4 or Form W-4P, which can then be submitted to your employer, pension provider, payroll department, or HR system. (IRS)
Changing your withholding can help you move closer to your preferred tax result. Some taxpayers want to reduce the chance of owing money at tax time, while others prefer to increase take-home pay and reduce over-withholding.
Withholding vs. Estimated Tax Payments
Withholding is most common for employees, pensions, and annuities. Estimated tax payments are often used by self-employed individuals, business owners, landlords, investors, and taxpayers with income that is not subject to enough withholding.
Many Boise small business owners need to think about both withholding and estimated tax payments, especially if they own an S corporation, have side income, receive rental income, or have investment income.
Succentrix Business Advisors helps clients review tax payments, estimated tax needs, bookkeeping records, and year-round tax planning strategies.
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Tax Withholding for Small Business Owners and S Corporation Owners
S corporation owners and small business owners may have more complex tax planning needs than traditional employees. Owner wages, payroll, distributions, estimated payments, deductions, and business profits can all affect your tax situation.
For business owners, tax withholding should be reviewed alongside bookkeeping, payroll records, financial statements, and year-end tax planning.
If your business income has changed significantly, or if you are unsure whether you are withholding enough, it may be time to review your tax plan.
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Get Help With Tax Withholding and Planning
The IRS Tax Withholding Estimator can be a helpful starting point, but it does not replace personalized tax advice. Your overall tax picture may include wages, business income, rental income, investments, retirement contributions, deductions, credits, and state tax considerations.
Succentrix Business Advisors provides tax preparation, tax planning, bookkeeping, accounting, and advisory services for individuals and small businesses in Boise, Meridian, Eagle, and throughout the Treasure Valley.
Contact Succentrix Business Advisors to schedule a consultation with a Boise CPA firm.