The amount of federal income tax withheld from your paycheck can affect how much money you take home during the year and how much you may receive as a refund later. The IRS offers a free online Tax Withholding Estimator to help workers calculate the appropriate amount that their employer should withhold.
What the IRS withholding estimator does
The tool calculates the amount of federal tax that should be withheld from your payments each year. Depending on the results, it can help you avoid having too little tax withheld, which could make a penalty more likely when you file your return, or having too much withheld, which would mean a larger paycheck now but a smaller refund later.
The estimator is available to people who work for an employer and receive a W-2 or who receive a pension or annuity with federal tax withheld. It cannot be used by people who have nonresident status for U.S. tax purposes.
What do you need to use the tool?
The IRS says users should have their most recent pay stubs from their jobs, pensions, or annuities. If filing jointly, they should also have their spouse’s most recent pay stubs.
People with other sources of income or who plan to itemize deductions may also need their most recent federal tax return, records of payments from self-employment, gig work, or Social Security, and documentation of expenses. The process takes about 25 minutes.
When should you check your withholding?
The IRS recommends checking your withholding in January to make sure the amount is correct for the year. It also recommends reviewing it after major life changes, such as starting a new job, a significant change in income, getting married or divorced, having or adopting a child, or buying a home.
If you decide to change your withholding, the estimator can create a pre-filled Form W-4 or W-4P that you can use to update your withholding with your employer or pension provider.