How To Adjust Tax Withholding From Your Paycheck

Accurately calculate your withholding for federal income taxes

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Dealing with your taxes is as much a matter of planning for next year as it is finishing and filing your tax return this year. Life isn't stagnant. Your income or deductions can change, but you can always adjust your withholding to avoid receiving too large of a refund or, even worse, owing a significant balance to the Internal Revenue Service (IRS) come tax time.

Finding the right level of withholding can be a balancing act—particularly if you anticipate big changes in the coming year—or personal events with tax implications like getting married, divorced, or having a child. Some general rules of thumb and an understanding of the process can help. The IRS provides interactive tools to help you along.

Key Takeaways

  • Calculating your tax withholding can be done via IRS Form W-4, which uses a question-and-answer format, allowing you to adjust your withholding upward or downward.
  • The IRS provides online tools to help you determine your withholding based on your income, expenses, and life circumstances.
  • A tax refund means you had too much withheld, and the IRS is returning your money, but you won't owe at tax time.
  • You can change your withholding at any time. You're not limited to an annual deadline.

Why Would a Refund Be a Bad Thing?

Receiving a tax refund actually means you gave the IRS more from your paycheck than you had to—money that you could otherwise have spent on bills, pleasure, retirement savings, or investments. The IRS held onto that extra money for you all year. It's just returning it to you when you get a tax refund—without interest. It would have served you better in a simple savings account.

The Withholding Form

Calculating your tax withholding can be done via IRS Form W-4, which uses a question-and-answer format, allowing you to adjust your withholding upward or downward.

You can have more withheld from your paycheck to cover you at tax time if you expect significant investment income or if you have other outside income that's not subject to withholding. You'll get a refund if you have too much withheld. You'll owe the IRS at tax time, and you could also incur a penalty if you adjust your withholding amount too far downward.


Paying at least 90% of your tax owed is usually enough to escape the estimated tax penalty.

Calculating Withholding More Accurately

One way to adjust your withholding is to prepare a projected tax return for the year. Use the same tax forms you used the previous year, but substitute this year's tax rates and income brackets. In other words, calculate your income and tax deductions based on the income you expect for this year and use the current tax rates to determine your projected tax for next year.

Then use the withholding calculator on the IRS website to see the suggested withholding for your personal situation. The number of dependents you support is an important component of your analysis, as is the number of income streams.

Calculating the Effect on Your Paychecks

You can use the number to see what the tax impact will be on your next paycheck when you've figured out your withholding. Plug your newly calculated withholding information into a payroll calculator. Make sure you have a recent pay stub handy so that you can use your actual income amounts.

Calculating Your Total Withholding for the Year

Take your new withholding amount per pay period and multiply it by the number of pay periods remaining in the year. Next, add in how much federal income tax has already been withheld year to date. This total represents approximately how much total federal tax will be withheld from your paycheck for the year.


Ask yourself whether you can easily write a check to the government plus a little interest if your calculations show that you're going to owe the IRS $500 in April. Now is the time to adjust if you can't do that.

Next, compare your total withholding to your tax liability projection. If your withholding amount is larger than your tax liability, that's how much of a federal tax refund you can expect to receive. If your withholding is less than your tax liability, that's how much federal tax you might have to pay when you file your tax return.

Remember that your withholding and tax liability amounts are approximate. You're close to where you need to be if they're not too far apart. You're free to change your withholding at any time during the tax year if a change in your circumstances would result in a tax increase or decrease.

Frequently Asked Questions (FAQs)

How do you change the tax withholding on SSI checks?

You can change your tax withholding on Social Security income, unemployment compensation, and other kinds of government benefits by submitting a new Form W-4V.

What is the average amount of taxes taken out of a paycheck?

The average tax wedge in the U.S. was about 28.4% for a single individual in 2021. The tax wedge isn't necessarily the average percentage taken out of someone's paycheck. Someone would have to pay just the right amount of taxes so that they wouldn't owe or get a refund when they file their tax return—in that case, the average rate of 28.4% would apply.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "W-4 Employee's Withholding Certificate 2022."

  2. IRS. "Pay as You Go, So You Won't Owe: A Guide to Withholding, Estimated Taxes, and Ways to Avoid the Estimated Tax Penalty."

  3. IRS. "Tax Withholding."

  4. IRS. "About Form W-4V, Voluntary Withholding Request."

  5. Organisation for Economic Co-operation and Development. "Taxing Wages 2022," Pages 2, 4.

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