Everyone Should Check Their Mid-Year Withholdings – Have You?

By: Saundra Uy, CPA, CVA, CGMA

Did you or your employees get your W-2 or file your income tax return, only to notice that your federal or state income taxes withheld from your paychecks were too low, or even zero? Especially in the day and age of direct deposit, many employees do not take a close look at their pay stubs or the amount of taxes that are being withheld from their paycheck.

It’s important to revisit your tax withholding annually or more often if you change jobs or your family status changes. Even if you did a Paycheck Checkup this year, you should do it again to account for differences in tax law and life changes, pay increases and bonuses, and other changes. A Paycheck Checkup can help you see if you’re withholding the right amount of tax from your paycheck. Too little could mean a disappointing tax refund or an unexpected tax bill.

The IRS provides this link to assist employees in checking whether their federal income tax withholdings are sufficient: https://www.irs.gov/paycheck-checkup

State income tax withholdings should also be checked. Employees can consult the West Virginia Tax Tables at https://tax.wv.gov/Documents/PIT/2022/PersonalIncomeTaxFormsAndInstructions.2022.pdf (beginning on page 35)

A low-tech method for checking your payroll tax withholdings is to use information from your most recent paystub to project approximately how much federal and state income tax will be reported on your 2023 W-2.

Multiply the federal, or state, income tax withheld on a normal paycheck x the total # of pay periods for the year.

  • Is this more or less than the taxes reported on your 2022 W-2?
  • How do the projected tax withholding amounts for this year compare to your federal and state tax liability on your 2022 income tax return?
  • Do either of these comparisons indicate that your payroll tax withholdings are too low (or too high)? If so, change your Form W-4 to get your tax withholdings to the desired level between now and the end of 2023.

Employees complete Form W-4 so their employer can withhold the correct federal income tax from their pay. Consider completing a new Form W-4 each year and when your personal or financial situation changes. Employees that need to change their tax withholdings should take action now and complete a new Form W-4 to request that their employer change their tax withholdings so that they are not caught by surprise when they file their income tax return next year. https://www.irs.gov/forms-pubs/about-form-w-4

Employees in West Virginia complete Form WV IT-104 so their employer can withhold the correct WV state income tax from their pay. Please be aware that your response to line 5 will determine whether your WV taxes are withheld at the lower one-income household rate. https://tax.wv.gov/Documents/TaxForms/it104.pdf

Employers, your human resource department, and payroll preparers are not in a position to advise employees on how to complete their W-4 or WV IT-104. Employees are responsible for filling out these forms and should take all their household factors into careful consideration. Employees have the option to add an extra $ dollar amount of tax to be withheld on each payroll (W-4 line 4c and WV IT-104 line 6).

After your employer has applied your new W-4 changes, review your next paystub carefully so you can make a new projection. You may need to change your W-4 more than once before you feel comfortable that your 2023 tax withholdings will be at the appropriate level. Contact Saundra Uy CPA, or your Suttle & Stalnaker, PLLC representative today for assistance to determine if you need to change your withholding.