Several people recently asked about their payroll withholding, or an employee has requested their employer about withholding on their checks, being different than it was in prior years. This often happens after-tax filing when people realize they either owed a lot of money or got a lot back and want to adjust their withholdings.
First off, as an employer, your job is to tell your employee to fill out a new W-4. Do not try to do tax calculations for them or adjust their withholdings for them. They must be in charge of this themselves. If you screw it up, you could be on the hook for a balanced due that they make to the I.R.S. So don’t jump in that pool. Ask the employee to fill out their new W-4. Now, if you’re in the boat of looking at your w four and you’re confused, there’s a logical reason why.
In 2020, after the I.R.S. had to eliminate the personal exemption from the tax code, based on the tax law that changed, they updated the W-4. So the W-4 no longer asks, like how many allowances do you have in the same way it did before? When it relates to people like how many kids do you have, how many people are filing on your return?
Now, there are a couple of sections of the W-4 that you need to be aware of if you want to make changes. First, in step two of the W-4, read those instructions very carefully. That’s just asking if you or your spouse each have jobs, and that’s trying to figure out how the withholding should work. Should we assume that you both have the same salary ish of a job, but, the more important part is looking at section four, if you’re self-employed, or if you’d like to have extra withholding withheld, you’ll list, just a flat amount there, you can also look at section three to determine how many dependents you have and try to adjust the withholdings?
In 2020, after the I.R.S. had to eliminate the personal exemption from the tax code, based on the tax law that changed, they updated the W-4. So the W-4 no longer asks, like how many allowances do you have in the same way it did before? When it relates to people like how many kids do you have, how many people are filing on your return?
The easiest way I suggest is to look at what your shortfall was or your overage. File a new W-4, and look at the change from one pay stub to another. Multiply that out by the number of remaining weeks of the year and see how close you come. You may have to make a couple of iterations to get this just the way you want it. The I.R.S. also has a calculator on its website where you can run some preliminary calculations with. Not sure how helpful it’ll be. But you can give that a shot too.
I’m Donna Bordeaux with PYOPAccounting.com. Please follow us on Facebook and Instagram. Check out our blog and our website from the link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. To contact me, email me at donna@pyopaccounting.com.
Donna Bordeaux, CPA with PYOPAccounting.com
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