Migrating to New Client Portal - Existing Clients

Migrating to New Client Portal

Withholding 101: Navigating tax withholding for individuals

Understanding the nuances of tax withholding can be a complex affair for individuals. However, from time to time, your tax withholding may need to be adjusted to remain compliant and financially secure. In this article, we’ll explore tax withholding basics and why you should or shouldn’t update your withholdings.

The nitty-gritty of tax withholding

It’s important to understand the tax withholding basics before making any changes. Tax withholding is the portion of your wages that are retained by your employer to be directly paid to the government. This serves as a contribution to your yearly income tax, Social Security and Medicare tax. Individuals and businesses must make sure that the accurate amount is withheld to adhere to IRS rules. And getting the amount right can help you avoid unexpected tax bills and optimize your annual returns.

Why and when to update

Your circumstances can change, so it’s important to know when and why your tax withholdings need to be updated. According to the IRS website, there are several situations that call for an individual to check their tax withholdings. This includes early in the year, whenever the tax law changes or when you experience life changes, such as:

  • A lifestyle change, like a marriage, divorce, birth or adoption of a child, a home purchase, retirement, or filing chapter 11 bankruptcy.

  • A wage income change, such as you or your spouse starting or stopping work and/or a second job.

  • Changes in taxable income not subject to withholding, like interest income, dividends, capital gains, self-employment income or IRA distributions.

  • Any adjustments to income, such as IRA deductions, student loan interest deductions or alimony expenses.

  • Any itemized deductions or tax credits, like medical expenses, taxes, interest expenses, gifts to charity, dependent care expenses, education credits, child tax credits or earned income credits.

If you experience any of these changes, you can use the IRS Tax Withholding Estimator and complete a new W-4 form for your employer.

Why and when not to update

While life-changing circumstances can require the need to change your tax withholdings, there are a few situations where maintaining your existing withholdings will suffice.

  • You have financial stability. If your financial circumstances are stable, with no significant changes in your income or personal life, your current withholding allowances may be adequate.

  • You have recently adjusted your withholdings. If you’ve recently adjusted your tax withholdings to reflect your current financial situation, consider the impact before you make any further changes.

  • You have minimal changes in income or deductions. In a case where there may only be a minimal change in your income or deduction, an immediate adjustment may not be necessary.

Making updates

If you need to make tax withholding updates, be sure you do your research. You want to have a clear understanding of any new IRS guidelines or tax laws. Refer to the IRS website for tax updates, calculators and the forms you’ll need.


Also, consider seeking the advice of a tax advisor. They’ll be able to help you with your specific needs and ensure you’re following all IRS guidelines and tax laws. Periodically review and adjust your withholding strategies to prevent any surprising tax bills…and to keep the IRS happy. 

Back to issue