W. Edward Newton Jr., CPA, CFP
13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 |
How to Avoid Having Too Much or
Too Little Federal Income Tax Withheld
encourage taxpayers to consider checking their tax
withholding, keeping in mind several factors that could affect
potential refunds or taxes they may owe in 2018.
Reviewing the amount of taxes withheld can help you avoid
having too much or too little federal income tax taken from
their paychecks. Having the correct amount taken out helps to
move taxpayers closer to a zero balance at the end of the year
when they file their tax return, which means no taxes owed or
During the year, changes sometimes occur in a taxpayer's life,
such as in their marital status, that impacts exemptions,
adjustments or credits that they will claim on their tax
return. When this happens, they need to give their employer a
new Form W-4, Employee's Withholding Allowance Certificate, to
change their withholding status or number of allowances.
Employers use the form to figure the amount of federal income
tax to be withheld from pay. Making these changes in the late
summer or early fall can give taxpayers enough time to adjust
their withholdings before the tax year ends in December.
The withholding review takes on even more importance now that
federal law requires the IRS to hold refunds a few weeks for
some early filers claiming the Earned Income Tax Credit and
the Additional Child Tax Credit. In addition, the steps the
IRS and state tax administrators are now taking to strengthen
protections against identity theft and refund fraud mean some
tax returns could face additional review time next year.
So far in 2017, the IRS has issued more than 106 million tax
refunds out of the 142 million total individual tax returns
processed, with the average refund well over $2,700.
Historically, refund dollar amounts have increased over time.
Making a Withholding Adjustment
In many cases, a new Form W-4, Employee's Withholding
Allowance Certificate, is all that is needed to make an
adjustment. Taxpayers submit it to their employer, and the
employer uses the form to figure the amount of federal income
tax to be withheld from their employee's pay.
The IRS offers several online
resources to help taxpayers bring taxes paid closer to what
they owe. They are available anytime on IRS.gov. They include:
- IRS Withholding Calculator – Online tool helps determine the
correct amount of tax to withhold.
- IRS Publication 505 – Tax Withholding and Estimated Tax.
- Tax Withholding – Complete information on withholding,
estimated taxes, FAQs, and more.
Self-employed taxpayers, including those involved in the
sharing economy, can use the Form 1040-ES worksheet to
correctly figure their estimated tax payments. If they also
work for an employer, they can often forgo making these
quarterly payments by instead having more tax taken out of
Feel free to give us a call if you have a question about this
particular topic or issue or if you
need help or want to
get started on tax planning for the rest of 2017 and
2018! If you have comments on the information in these
articles, as usual feel free to call our offices.
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Certified Public Accountant