- The IRS has a free online tool to help Americans estimate their W-4 amount. (TRUE) You can double-check your withholding with the IRS Tax Withholding Estimator as well as other resources such as the calculator from Turbotax.
- Updates to the W-4 form are recommended for certain life changes, like having a child. (TRUE)
- The W-4 form should be coordinated on all jobs for accurate tax withholding. (TRUE)
When and how to review
When starting a new job, you typically complete Form W-4, dictating how much your employer needs to withhold from each paycheck for federal taxes. Many wrongly assume it is a one-time activity. Embarrassingly, I have not checked my W-4 in over 3 years, since I started as a new faculty. Why would I? I had no major life changes, and assumed things were stationary, and was planning for a reasonable, penalty free tax bill. Going forward, you should revisit your W-4 at least once a year, and particularly after filing taxes. It would be prudent if you are in a situation of over or underpaying to check in quarterly using the IRS tax withholding estimator or the resource mentioned on Turbotax.
Adjust withholding and IRS tax withholding estimator
Top reasons to adjust your withholding:
- Tax law changes. (See Tax Cuts and Jobs Acts)
- Lifestyle changes like marriage, divorce, children, home purchase
- New jobs, side gigs or unemployment
- Tax deductions and credit shifts (See Useful Deductions you may be missing out on)
Ultimately, what my husband and I will end up doing is consider the amount owed, divide by 12, and add on each of our W-4, as extra withholdings. I will check in 3-4 times this year using the tax calculator on the IRS site to see how close we can get. The goal is to not overpay. Finally, keep your tax money safe. If you owe on April 15, either deliberately or accidentally, you will need to square up. Staying ahead will prevent this problem going forward.
The ASA Committee on Young Physicians is pleased to present this monthly article series on personal finance. These articles are not written by hedge fund managers or real estate tycoons but by practicing physicians. Some have business degrees and some do not – but every contributor is an anesthesiologist who has some guidance to offer the rising generation of attending physicians. It is not the intention of the committee to offer definitive financial advice, but rather some pearls of wisdom to consider while developing a personal fiscal plan.
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