All taxpayers should do this as soon as possible, IRS advises
The Internal Revenue Service wants to add something to your end-of-year to-do list.
Taxpayers should review their tax withholdings as soon as possible to avoid a surprise when they file their returns next year.
“Although it’s best for taxpayers to verify withholding early in the year, an adjustment made in the final weeks of 2023 could still help to avoid an unexpected result, such as a big refund or a balance due, when filing taxes next year,” the agency said in a statement. “With only a few weeks left in the year, the IRS encouraged people who haven’t checked their withholding recently to do it soon so they can make any withholding adjustments needed.”
Taxes are generally paid throughout the year with employers withholding income tax from employees’ salaries and then submitting it to the IRS. About 70% of taxpayers, however, withhold too much each year which results in a one-time refund but over-reduces their paychecks throughout the year.
“Proper withholding adjustments help people boost take-home pay rather than be over-withheld and get it back as a tax refund,” the IRS said.
Other life events that can impact withholdings include marriage or childbirth, job loss and unemployment compensation and disasters, such as wildfires or hurricanes.
On the opposite side, withholding too little can result in a taxpayer owing a higher-than-expected bill.
How to determine withholdings
The IRS has a tool that can make figuring your withholding easier.
The Tax Withholding Estimator can determine if they have too much income tax withheld and how to adjust the amounts. It can also help taxpayers determine if they should withhold more or make an estimated tax payment to avoid a surprise bill when they file.