Double Check Your Paycheck
March and April… the time of year when trees start to bud, the days get a little brighter, and the tax refunds (or bills!) start rolling in. For some employees, the results of their personal income tax return might cause them to question their withholding and pay stubs. However, by the time tax time comes around, it’s too late to make changes. Employees can revisit their withholding elections in order to have a better experience next tax season. The sooner in the year the adjustments are made, the better.
The fact of the matter is, direct deposit has streamlined the payroll process so much that many employees aren’t as diligent as they used to be in reviewing their pay stubs. Out of sight, out of mind! Errors and mishaps can still happen, so make it a point to review pay stubs every once in a while for inconsistencies or inaccuracies.
The same goes for tax withholding. Many W-2 taxpayers may not realize their Form W-4 has to be updated in certain life circumstances. If completing a tax return uncovers an issue with tax and paycheck withholdings, it’s a major sign to review and update the form. This is the taxpayer’s responsibility, not the employer’s or the payroll processor’s.
Infographic: Double Check Your Paycheck
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Why Review Your Pay Stubs?
Errors happen. It’s estimated that 1 in 3 employers make a paycheck mistake. Reasons could be human error, data entry typo, miscommunication, or changing providers/systems.
Early correction. If you check your pay stub regularly, you can quickly notice and rectify any inaccuracies before the error goes on for too long.
Proof of income. Buying a house? Renting an apartment? Applying for a loan? Your paystubs are often requested as proof of income and even documentation for your tax return. You want it to be accurate!
Common paycheck mistakes may include:
- Under or overpayment
- Incorrect wage rate or hours worked
- Typo or outdated demographic details
- Tax miscalculation
- Missing/inaccurate benefit deductions
- Wrong retirement plan contribution
- PTO errors
Withholding error? If your paycheck matches up to your Form W4 elections, it is not a payroll error. It is your responsibility to review your withholding information.
When to Review Your Withholding
Did you recently file your tax return, but are unhappy with the results? Here are four questions to address:
Was your tax refund or balance due what you expected? Too low of a refund? Too high of a bill? Avoid unpleasant surprises at tax time by adjusting your withholdings.
Do you need to make estimated tax payments? Avoid an under-withholding penalty. Your current withholding may not be sufficient to cover your tax liability.
Did you experience a major life event in the past year? Tax triggers include marriage, divorce, inheritance, a promotion, second job, side hustle(s), new baby, and more.
Do you want to prioritize funding a retirement plan? While not a Form W4 item, it does come out of your paycheck. Small, consistent contributions add up!
How to Update Form W4
- Download a new Form W4 pdf.
- Visit IRS.gov’s Tax Withholding Estimator.
- Experiment with Abacus Payroll’s W4 Assistant Calculator.
- Consult with your CPA to review your tax return, tax-triggering life events, and tax projections for next year.
Once complete, give your new Form W4 to HR or your company’s payroll administrator.
Don’t Set it and Forget it
Make it a point to continuously check in on your pay stubs, review your Form W4 at the start of each year, after any tax season surprises, and following any major life events.
Contact a Friendly Payroll Specialist
Abacus Payroll is here to help you and your employees have a hassle-free payroll experience. Request a quote today by calling 856.667.6225.
- Form W4: Have Your Employees Updated Their Federal and State Forms?
- Withholding Updates: A New Form W4 and a New IRS Withholding Tool
- Updating Your W-4 Form: When and Why?
- New Form W-4 Creates More Questions
- What to Do if You’ve Accidentally Overpaid an Employee
- Stop Making These 8 Payroll Mistakes
- Retain Employees: Steps to Take to Reduce Chances of Payroll Errors
- Anatomy of a Paycheck: What to Deduct and Why
- Why You Need To Review Your Pay Stubs
- Tax Season Lessons: The Importance of a Paycheck Checkup