Tax Withholding Adjustments Can Boost Your Paycheck Now and Avoid Penalties Later
If you've had too much or too little tax withheld from your paychecks, there's still time to submit a new Form W-4 to change your tax withholding for the rest of the year.


Do yourself a favor: Look at your last paycheck and see how much federal income tax has been withheld from your wages so far this year. If you've had too much or too little withheld, there's still time to adjust your tax withholding for the rest of the year (and beyond). But, since you probably only have a couple of pay periods left this year, you need to act as soon as possible to have an impact on your overall 2021 withholding.
Making a change can put more money in your pocket now…or shield you from an IRS penalty later. The goal is to have your annual tax withholding be as close to your overall tax liability for the year. Think like Goldilocks – you want your tax withholding to be "just right."
If you have too much tax withheld during the year, your take-home pay isn't as high as it could be and you're effectively giving Uncle Sam an interest-free loan each pay period (you won't get paid back until you get your next tax refund). Reducing your tax withholding in this case will immediately boost your paycheck (it's like giving yourself a raise). And, yes, next year's tax refund will be smaller…but that just means you're not letting the government hold on to and use your money for a few months (again, without paying interest).
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
On the other hand, if your employer doesn't withhold at least (1) 90% of the income tax you expect to owe for 2021, or (2) 100% of the tax you paid for 2020 (110% if your 2020 adjusted gross income was more than $150,000), you could be hit with an underpayment penalty when you file your federal tax return next April. Increasing your tax withholding now can help reduce or completely avoid this penalty. It can also lower or prevent a tax bill when you file your federal tax return next year.
File a New W-4 Form to Change Your Tax Withholding
There are many reasons why your tax withholding could be a bit off. Common causes include a marriage, divorce, birth of a child, or home purchase during the year. If it looks like your 2021 tax withholding is going to be too high or too low because of one of these or some other reason, you can submit a new Form W-4 now to increase or decrease your withholding for the rest of the year. Give the new form to your employer and they'll take it from there (check with your HR department to find out exactly who you should send the form to). Your employer must implement any change by the start of the first payroll period ending on or after the 30th day after you submit a new W-4 form for this year.
Although there are five "steps" on the W-4 form, only Step 1 (name, address and filing status) and Step 5 (sign and date) are required for everyone. You only have to complete Steps 2 to 4 if they apply to you (e.g., you have more than one job, a spouse that works, dependents or other adjustments). Completing all relevant steps will bring your tax withholding closer to your tax liability, which (again) is the goal.
If you just want to increase your withholding, one easy way to do this is to specify an extra amount you'd like to have withheld from your paycheck on Line 4(c) of the W-4 form.
IRS's Withholding Tax Calculator
To help you determine if and/or how much to adjust your 2021 withholding, use the IRS's Tax Withholding Estimator as soon as you can. Have your most recent pay stub and a copy of your 2020 tax return handy to help estimate your 2021 income. Again, you must act quickly, since we're almost to the end of the year.
We also recommend using the tax withholding calculator early in 2022 to see if additional adjustments are beneficial going forward. In fact, it's a good idea to check your withholding every year. And the earlier in the year you do it – and make any necessary adjustments – the better. That way your tax withholding will be more even and accurate throughout the year.
But remember that you aren't required to submit a new W-4 form to your employer unless you're starting a new job. If your company doesn't receive a new form from you, it will just continue to withhold taxes based on the most recent W-4 it has on file for you.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
-
Klarna IPO: Should You Buy KLAR Stock?
The Klarna IPO is expected to be one of the biggest offerings of the year, with the buy-now-pay-later firm expected to start trading next week.
-
Market Fees Could Be Costing You — Here’s How to Avoid Them
Some money market accounts charge more than they earn. Here's how to spot costly fees and choose smarter savings options.
-
I’m Over 65 and Itemize: Can I Claim the New $6,000 ‘Senior Bonus’ Tax Deduction?
Tax Changes If you’re an older adult, a new bonus deduction could provide a valuable tax benefit.
-
Another State Rebels Against Trump’s New 2025 Tax Law: What Now?
State Taxes Even if states adopt tax policies in the so-called ‘big beautiful bill,’ lawmakers may have workarounds at their fingertips.
-
Ask the Editor, August 29: Tax Questions on Estate and Gift Taxes
Ask the Editor In this week's Ask the Editor Q&A, we answer questions from readers on estate and gift taxes.
-
Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement?
Retirement Taxes Social Security benefit payments might land you in hot water when filing 2025 taxes — here are three reasons why.
-
Ask the Editor, August 22: Tax Questions on What Congress Will Do Next
Ask the Editor In this week's Ask the Editor Q&A, we answer questions from readers on what Congress will do next with taxes.
-
Stay NJ Could Give You $6,500: The Deadline You Can't Miss
Property Taxes New Jersey has a new property tax relief program for 2025. The application deadline is approaching fast.
-
Ask the Editor, August 15: Tax Questions on the OBBB, Tax Rates
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the OBBB and changes, if any, to tax rates.
-
The Fall Garden Tax? What to Plant and How to Prepare
Tax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.