If personal income has been impacted by the COVID-19 virus, you might want to update your W-4 form to ensure that the IRS isn’t withholding too much or too little from your paycheck.
People who should check their withholding include those:
- who received unemployment at any time during the year
- work two or more jobs or who only work for part of the year
- who are part of two-income families
- with children who claim credits such as the child tax credit
- with older dependents, including children age 17 or older
- who itemized deductions on their 2019 tax return
- with high incomes and more complex tax returns
- with large tax refunds or large tax bills for 2019
People should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If adjustments aren’t made for these situations, they will likely owe additional tax and possibly penalties when filing their tax return.
On the other hand, people should generally decrease their withholding if they are eligible for income tax credits or deductions other than the basic standard deduction.
The IRS offers a Tax Withholding Estimator that gives workers, retirees, and self-employed individuals a step-by-step method to help determine if they should adjust their withholding. Those who need to make adjustments should fill out a new W-4 form and submit it to their employer.