Here’s what taxpayers should know about doing a Paycheck Checkup
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Everyone should check their withholding by doing a Paycheck Checkup ASAP, even if they did one in 2018. The federal income tax is a pay-as-you-go tax. This means that taxpayers pay the tax as they earn or receive income during the year. This also means that taxpayers can avoid a surprise at tax time by checking their withholding amount the year before.
By checking their withholding, taxpayers can make sure enough is being taken out of their paychecks or other income to cover the tax owed. Here are some things taxpayers should know about withholding and why checking it is important:
- An employer generally withholds income tax from their employee’s paycheck. The employers then pays it to the IRS on the taxpayer’s behalf.
- Anyone who receives a pension or annuity should also check their withholding to make sure their withholding from their pension or annuity cover their taxes.
- Wages paid, along with any amounts withheld, are reflected on the Form W-2, Wage and Tax Statement. Employees generally receive this statement at the beginning of the year before they must file their taxes.
- The information an employee gives to their employer on Form W–4, Employee's Withholding Allowance Certificate and income the employee earned determines withholdings. For the 2019 Form W-4 this includes:
- Filing status: Either the single rate or the lower married rate.
- Number of withholding allowances claimed: Each allowance claimed reduces the amount withheld.
- Additional withholding: An employee can request an additional amount to be withheld from each paycheck.
- When filling out a 2019 W-4, employees must specify a filing status and their number of withholding allowances. They cannot specify only a dollar amount of withholding.
- Doing a Paycheck Checkup now is especially important for anyone with a 2018 tax bill.
- By changing withholding now, employees can boost tax withholding early in 2019 to head off a potential tax bill a year from now. In addition, taxpayers should always check their withholding when a major life event occurs or when their income changes.
The best way for people to do a Paycheck Checkup is to use the Withholding Calculator on IRS.gov.
Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.
Certified QuickBooks Proadvisor in Houston.
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