Do You Need a Paycheck Checkup?
Apr 20, 2022
Did you have an unexpected bill or refund when filing your taxes this year? Has your income gone up or down? Have you had a change in your filing status? Then it might be time for a paycheck checkup to make sure your withholdings are where they need to be.
Why You Need to Check Your Withholdings
You want to make sure you’re paying taxes at an appropriate level. If your withholdings are too high, you’re probably making do with less take-home pay than you need to. If they’re too low, you could have an unwelcome bill come tax time.
It’s a good idea to check your pay stubs periodically. Certain scenarios or changes to your situation mean you should check them sooner rather than later.
When You Need a Checkup
If you’ve been working at the same company for a while, checking your pay stub is a good idea if:
- Your household has more than one income stream. Typically, employers calculate your tax withholding based on your salary, but if you receive income from multiple sources, the combined amount could put you in a higher tax bracket. This means you might end up owing more than you expected.
- You change your filing status. Marriage and divorce can impact your tax picture.
- You got a hefty refund or bill. This means your withholdings were above or below where they should be for your situation.
- Your income changed dramatically. If you got a raise, lost a job, received an inheritance, or any number of life changes that affected your income, it’s worth checking to make sure your withholdings match your new standing.
- You claim the Child Tax Credit. Recent changes to the child tax credit law could affect your tax picture.
- Your dependents are 17 or older. The Tax Cuts and Jobs Act added a new credit for certain dependents, which could affect your tax situation.
- You moved to a different state but stayed with the same employer. Make sure the state withholdings are updated.
If you’re relatively new at a company, it’s worth checking your pay stub to make sure:
- Federal and state taxes are being withheld. Come tax time, you don’t want to find out there was a mistake and end up owing more than you expected.
- Taxes are at the appropriate level for your total household income. If any of the scenarios above are true for you, you might opt to change your Form W-4.
How to Perform a Checkup
You can use the IRS tax withholding estimator. This secure tool will help you calculate your federal withholding and see how adjustments will affect your take-home pay and potential tax bill or refund.
- A recent pay stub (Make sure to have one for each employer in your household.)
- Additional income amounts
- Your previous year’s tax return
You can also contact us to help you determine the best level for your situation. If you’d like more help, we can work with you to develop a personalized tax strategy.