Avoid a Big Tax Bill—Check Withholdings Now!

Picture this: you file your taxes, expecting a nice refund, only to find out you owe a big chunk of money. Yikes! It’s often because your federal or state withholdings weren’t set up correctly. Payroll departments can make mistakes, and sometimes we mess up our W-4 forms, too.

Here’s an easy way to avoid that nasty surprise: check your paystubs regularly to see what’s being withheld. A quick rule of thumb—take your federal tax withholding from your paycheck, divide it by your gross pay, and see the percentage. For example, if you’re having 5% withheld but make $100,000 a year, something’s off! That percentage should align with your effective tax rate, which your tax preparer should share with you.

The IRS has a paycheck withholding calculator, but I find the updated W-4 form does a great job of estimating what you need, especially if you and your spouse are both high earners. Take a few minutes to double-check. If you suddenly notice more take-home pay without getting a raise, that’s a red flag—your withholdings might be too low.

Don’t wait until the end of the year to discover you owe a big tax bill when you were counting on a refund! Always review your withholdings when you start a new job or get a raise. A little effort now can save you a lot of stress later. Need help? Reach out—we’re here to make sure your taxes go smoothly!