You May Need to Adjust your Tax Withholdings

If your latest tax return came with a big refund, or a surprise bill, your tax withholding likely needs a tweak. Small differences are normal, but larger gaps can hurt your cash flow or lead to penalties.

Now’s a great time to adjust. Fine-tuning your tax withholding early can help keep your 2026 taxes on track.

Start with a Quick Check

If most of your income comes from wages, your employer automatically withholds taxes based on IRS tables. These are designed to estimate a typical worker’s tax liability at your income level, but your situation may not be typical.

For example, if you claim more deductions or credits than average, you might have too much withheld. On the other hand, if you have additional income streams like freelance work or investments, your withholdings may fall short.

Make Smart Adjustments

To avoid overpaying or underpaying, it helps to estimate your expected tax liability for the year. If adjustments are necessary, you can submit an updated Form W-4, “Employee’s Withholding Certificate,” to your employer.

The IRS Tax Withholding Estimator is a useful tool for this process. It reflects recent tax law updates, including changes affecting tips, overtime, and certain deductions, and can give you a clearer picture of how much should be withheld.

** Remember: Updates may take a few pay cycles to kick in.

Revisit when Life Changes

Life happens, and major life events can throw off your withholding. Review and adjust, if you:

• Change jobs or income levels

• Get married or divorced

• Add a dependent

• Buy a home

• Start earning income without withholding

Use Withholding to your Advantage

If you earn income that isn’t automatically taxed through withholding, you can increase the amount withheld from your paycheck or retirement distributions to help cover any potential tax shortfall. Unlike estimated tax payments, withholding is treated as if payments are made evenly throughout the year which helps you avoid penalties for underpayment.

Find the Balance

The goal is simple — pay close to what you owe without over or underpaying. A quick adjustment now can mean better cash flow, and fewer surprises later.

If you're unsure where to begin or whether you need to change your withholdings, consult a VAAS Tax Advisor for personalized advice.