What is Income Tax Withholding?

When you earn income, your employer deducts a portion for withholding taxes, which are paid to the government on your behalf. These deductions are based on your earnings and information provided on your Form W-4.

How is Withholding Calculated?

Your employer uses IRS withholding tables and adjustments from your W-4 to calculate withholding. Factors considered include:

* Filing status
* Dependents
* Additional income
* Eligible deductions
* Extra withholding requests

Checking Your Withholding

Use the IRS Tax Withholding Estimator to check your withholding accuracy. By providing your income, adjustments, and credits, the calculator estimates your tax obligation and potential refund or underpayment.

Changing Your Withholding

Complete a new W-4 if you need to adjust your withholding. Consider life changes, income changes, or discrepancies in your estimated calculations.

Exemptions from Withholding

If you had no federal income tax liability the previous year and expect none this year, write "Exempt" on your W-4. However, this does not guarantee freedom from tax liability.

Understanding Withholding vs. Tax Liability

Withholding taxes may not fully cover your income tax obligation. When you file your tax return, your total income, deductions, and credits will determine your actual tax liability.

Importance of Accurate Withholding

Aim for withholding taxes that closely match your actual tax liability. Large refunds or tax bills may indicate a need for adjustments.