Tax Withholding

Personal Finance

Tax withholding is the portion of your W-2 paycheck your employer sends directly to the IRS and state on your behalf, based on the W-4 you submitted. The goal is to pay roughly the right amount across the year so neither you nor the IRS owes much come April. Too much withholding means an interest-free loan to the government; too little can trigger underpayment penalties. The 2020 W-4 redesign removed allowances and uses dollar-amount adjustments instead — review yours after major life changes (marriage, baby, second job, large bonus). Self-employed taxpayers handle the equivalent through quarterly estimated payments.