IRS: Check Your

Withholding Statements

HARTFORD — With the current tax year in its eighth month, the Internal Revenue Service encourages Connecticut taxpayers to take a few minutes to check their withholding to make sure what is being taken out of their paychecks matches their projected taxes.

If not enough is withheld, individuals will owe tax at the end of the year and may, in some cases, have to pay a penalty. If too much tax is withheld, they will lose the use of this money until they get their refund.

Taxpayers should pay particular attention to their withholding if they received a big refund check this year or if they had to make a tax payment that was more than they could comfortably pay According to IRS Connecticut spokeswoman Dianne Besunder, over three-quarters of the individual tax returns filed so far for last year resulted in a refund. The average refund thru July 22, 2005, was $2,111.

“At this time of year, it makes good financial sense to take a few minutes to make sure you’re on target with your withholding,” said Ms Besunder. “If you’re not having enough withheld, you may still have time to avoid a penalty. If you are having too much withheld, now is the time to put a little more into your own pocket.”

 The easiest way to check on your withholding is by using the IRS “Withholding Calculator” available on the “Individuals” page of the IRS website (www.irs.gov). With the help of current pay stubs and a copy of last year’s tax form, users can check to see if they are withholding the right amount. Information from this calculator can then be used to revise a W-4. Employers use the information on the W-4 to figure the taxes to be withheld from employee compensation according to calculation methods provided by the IRS. Additional information is also available in IRS Publication 919, How Do I Adjust My Tax Withholding?

Individuals should also check their withholding if there are significant personal or financial changes in their life. Many of these changes involve the addition or reduction of exemptions or a change in filing status that alters the tax liability, even if there has been no change in income. These include marriage, divorce, the birth or adoption of a child, the purchase or sale of a new home, and retirement.