As an employer or HR professional, did you field a lot of questions from your employees this past tax season about their withholdings? You’re not alone! Tax time can bring unexpected financial stress if the right amount of taxes hasn’t been taken out throughout the year. But here’s the good news: you and your employees can take proactive steps now to potentially avoid those same questions – and frustrations – next year.
One of the simplest yet most effective ways to ensure accurate tax withholding is for your employees to regularly check their pay stubs for taxes. We know they’re busy, but a quick glance at each pay statement can make a big difference.
Why is Now a Great Time to Check?
We’re approaching the halfway point of the year. This makes it an ideal time for your employees to take a look at their year-to-date earnings and the amount of taxes that have been withheld so far. If any discrepancies or unexpected amounts are noticed now, there’s still plenty of time to make adjustments. Waiting until the end of the year significantly limits the options for correcting any over or under-withholding.
What Should Employees Be Looking For?
Encourage your team to pay attention to these key areas on their pay stubs:
- Gross Pay: This is their total earnings before any deductions.
- Federal and State Income Tax Withholding: This is the amount of money being deducted for federal and state income taxes. They should ensure this aligns with their W-4 elections and any life changes they’ve experienced (marriage, birth of a child, etc.).
- Social Security and Medicare Taxes: These are mandatory deductions. Employees should verify that these amounts are being calculated correctly based on their gross pay.
- Other Deductions: While not directly related to income tax withholding, employees should also review other deductions like health insurance premiums, retirement contributions, etc., to ensure accuracy.
What Happens If Something Doesn’t Look Right?
If an employee notices that too much or too little tax seems to be withheld, they should take the following steps:
- Review Their W-4: Their current W-4 form on file with the company dictates their tax withholding. Life changes can impact the appropriate withholding amount, so it’s a good idea to revisit this form periodically.
- Use the IRS Tax Withholding Estimator: The IRS offers a helpful online tool that employees can use to estimate their tax liability and determine if their current withholding is appropriate.
- Reach Out to Their Point-of-Contact at Their Company: If, after reviewing their W-4 and using the IRS estimator, an employee believes their withholding needs to be adjusted, they should reach out to the proper point-of-contact at your company. You can guide them through the process of submitting a new W-4 form to us. Individual forms can be found on this page of our website.
Your Role in Encouraging Pay Stub Reviews:
As their employer, you play a crucial role in fostering this awareness. Consider:
- Communicating Regularly: Remind employees through emails, internal newsletters, or even breakroom posters about the importance of checking their pay stubs.
- Providing Resources: Make information about accessing pay stubs and understanding deductions readily available. If your employees don’t currently utilize Employee Self-service or MyGO, please contact your Capital Payroll representative to learn how they can get access.
- Being Responsive: Ensure you are prepared to answer employee questions about their pay stubs and W-4 forms.
By encouraging your employees to take a few moments to check their pay stubs for taxes, you can empower them to take control of their tax situation and potentially avoid unwelcome surprises next tax season. It’s a small effort that can lead to significant peace of mind for everyone.
