Use the Paycheck Checkup if You Have Other Sources of Income
If you’re working for an employer and have other income sources outside your job, you should get a Paycheck Checkup. For more information, go to https://www.irs.gov/newsroom/time-for-a-paycheck-checkup.
Doing a paycheck checkup with the Withholding Calculator may help you avoid paying taxes at tax filing time. Go to https://apps.irs.gov/app/withholdingcalculator/.
Other income sources may come, for example, from the exchange of products and services in a sharing economy, interest, dividends, self-employment, capital gains, prizes, or awards.
Taxpayers may find the calculator especially important this year in the wake of changes to the tax code from the Tax Cuts and Jobs Act.
Here are some items to consider if you’re thinking about changing your withholdings to avoid a tax bill:
- You should pay at least 90% of your income tax through withholding.
- You can use Form W-4 to make adjustments to your income if the Withholding Calculator estimates you will have to pay taxes. Go to https://www.irs.gov/pub/irs-pdf/fw4.pdf.
- If you’re generating income from other sources, you can still reduce or eliminate the possibility you’ll owe further taxes when you file your return by claiming fewer withholding allowances on your Form W-4.
- You may also request your employer withhold an additional amount of money from your paycheck if you anticipate having to pay taxes at filing.
- If you have to make additional tax payments through your paycheck, you may use Form 1040-ES, Estimated Tax for Individuals, to calculate an appropriate amount. Go to https://www.irs.gov/pub/irs-pdf/f1040es.pdf. Other details may apply, and you can find more information on the IRS website.
- Tip adapted from the IRS.gov[i]
- This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
- For additional questions, go to https://www.irs.gov/payments.
Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. This material has been prepared for planning purposes only and is not intended as specific tax or legal advice. Tax and legal laws are often complex and frequently change. Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.
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[i] https://www.irs.gov/newsroom/employees-with-other-sources-of-income-should-do-a-paycheck-checkup
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