Your W-4 (withholding form) is what your employer uses, along with tables provided by the IRS, to calculate the amount of taxes to withhold from your paychecks throughout the year. Withhold too much and you get a refund at tax time. Withhold too little and you’ll be writing the IRS a check in April.
The 2017 Tax Cuts and Jobs Act made many changes, including some that impact the amount of taxes withheld from your paycheck in 2018 and forward. If you usually counted on a big tax refund, you may have been surprised last year by a smaller refund or maybe even owing more. This year (2020), the W-4 has been updated in an attempt to simplify the process and and improve tax withholding accuracy. If your personal situation has changed during the past year (marriage, divorce, new dependents, additional income, etc) and your employer isn’t aware, they will continue to withhold based on the last W-4 you completed. It’s a good idea to review it if you aren’t sure when the last time yours was updated.
If you ended up owing taxes last year, do a “paycheck checkup” by reviewing your withholdings as soon as possible for the rest of 2020. It’s too late to make changes to your withholdings to change your 2019 taxes but you can still make withholding changes for 2020. The IRS offers a withholding calculator on their website to assist with filling out your W-4. Still not sure if you should adjust your W-4? Read the full article here.