The federal income tax is a pay-as-you-go tax. You pay the tax as you earn or receive income during the year. What is tax withholding? If you're an employee, your employer probably withholds income tax from your paycheck and pays it to the IRS in your name. What is estimated tax? If you don’t pay your taxes through withholding, or don’t pay enough tax that way, you may have to pay estimated tax. People who are self-employed generally pay their tax this way. Check your withholding Avoid a surprise at tax time and check your withholding amount. Too little can lead to a tax bill or penalty. Too much can mean you won’t have use of the money until you receive a tax refund. Use the Tax Withholding Estimator When to check your withholding: Early in the year When the tax law changes When you have life changes: Lifestyle - Marriage, divorce, birth or adoption of a child, home purchase, retirement, filing chapter 11 bankruptcy Wage income - You or your spouse start or stop working or start or stop a second job Taxable income not subject to withholding - Interest income, dividends, capital gains, self employment income, IRA (including certain Roth IRA) distributions Adjustments to income - IRA deduction, student loan interest deduction, alimony expense Itemized deductions or tax credits - Medical expenses, taxes, interest expense, gifts to charity, dependent care expenses, education credit, child tax credit, earned income credit Change your withholding Note: You may use the results from the Tax Withholding Estimator. To change your tax withholding you should: Complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to your employer. Complete a new Form W-4P, Withholding Certificate for Pension or Annuity Payments, and submit it to your payer Make an additional or estimated tax payment to the IRS before the end of the year Understand tax withholding What pay is subject to withholding Your regular pay, commissions and vacation pay. Reimbursements and other expense allowances paid under a non-accountable plan. Pensions, bonuses, commissions, gambling winnings and certain other income. How to figure your withholding amount It depends on: The amount of income you earn. The information you give to your employer on Form W–4, Employee's Withholding Certificate: Note: You must specify a filing status on the Form W-4 and complete other parts of the form if you expect to have additional income, deductions beyond the standard deduction, or tax credits. You cannot specify only a dollar amount for your employer to withhold. Resources Pay as You Go, So You Won't Owe Estimated Taxes Publications Publication 15 (Circular E), Employer's Tax Guide - includes tax withholding tables PDF Publication 505, Tax Withholding and Estimated Tax Publication 5307, Tax Reform: Basics for Individuals and Families PDF Forms Form 1040-ES, Estimated Taxes for Individuals Form W-4, Employee's Withholding Allowance Certificate Form W-4P, Withholding Certificate for Pension or Annuity Payments Form W-4S, Request for Federal Income Tax Withholding from Sick Pay Form W-4V, Voluntary Withholding Request
