Do You Need to Adjust Your Tax Withholding?
Once you've filed last year's tax return and can see where your finances are headed this year, it may be a good time to adjust your income tax withholding to help make sure you're having the right amount withheld from your paycheck.
Tax withholding is a balancing act. If you have too much tax withheld, you will receive a refund when you file your income tax return. If you prefer to receive more in your paycheck instead, you will need to reduce your withholding. However, if you have too little tax withheld, you will owe tax when you file your tax return and might owe a penalty.
Two tools — IRS Form W-4 and the Tax Withholding Estimator on irs.gov — can be used to help figure out the right amount of federal income tax to have withheld from your paycheck. Using these can be beneficial when tax laws change, your filing status changes, you start a new job, or you have other major life changes. You might make a special effort to review your withholding if any of the following situations apply:
- Filing as a two-income family
- Holding more than one job at the same time
- Working for only part of the year
- Claiming credits, such as the child tax credit
- Itemizing deductions
- Having a high income and a complex return
How to adjust your withholding
Your employer will withhold tax from your paycheck based on the information you provide on Form W-4 and the IRS withholding tables. In some cases, you will need to give your employer a new Form W-4 within 10 days of a change in personal circumstances (for example, if the number of allowances you are allowed to claim is reduced or your filing status changes from married to single). In other cases, you can submit a new Form W-4 whenever you wish. See IRS Publication 505 for more information.
If you have a large amount of nonwage income, such as interest, dividends, or capital gains, you might want to increase the tax withheld or claim fewer allowances. In this situation, also consider making estimated tax payments using IRS Form 1040-ES.
You can claim exemption from federal tax withholding on Form W-4 if both of these situations apply: (1) in the prior tax year, you were entitled to a refund of all federal income tax withheld because you had no tax liability, and (2) for the current year, you expect a refund of all federal income tax withheld because you anticipate having no tax liability.
Content provided by Forefield/Broadbridge for use by Eliot M. Weissberg, CFP®, CFS, of Raymond James Financial Services, Inc., Member FINRA/SIPC. The Investors Center, Inc. is an independent company. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from various sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Eliot Weissberg and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Past performances may not be indicative of future results. You should discuss any tax or legal matters with the appropriate professional. M24-465565 through 04/09/2025.
