Singletary: Strive to hit right note when taxes withheld

Each year, employers withhold more than $1 trillion in income tax from employees’ pay, including wages, bonuses and commissions, according to the GAO.

Sen. Ron Wyden, D-Ore., and Rep. Richard Neal, D-Mass., asked the GAO to review the revised federal tax withholding tables for 2018.

The overwhelming majority of people — 73 percent — will still be in a situation where too much is withheld, according to the GAO. Meanwhile, 21 percent of taxpayers might not be withholding enough from their paychecks to cover their tax bill.

Ideally, the goal is to have your withholdings match your actual tax obligation. You might owe a little or get a tiny refund. But the current withholding system is biased slightly toward over-withholding, the GAO says in its report.

So how do you hit the right withholding or something close to it?

Review your W-4 Employee’s Withholding Allowance Certificate. As a wage earner, you are required to pay federal income tax by having it withheld from your pay throughout the year. The amount is based on the number of allowances you claim on your W-4. Allowances are based on your anticipated tax deductions (mortgage interest, charitable gifts, deductible medical expenses, etc.). If your tax situation changes — you get married, have a child or purchase a home — you should fill out a new W-4 form.

You can calculate the right number of allowances by using the worksheet on the W-4. Or you can go to irs.gov and search for “Withholding Calculator.”

Do this soon, because we’re already more than halfway through the year. If you find you’re going to owe, you’ll need to catch up by increasing your withholdings.

If you fall into the following groups you definitely should check what’s being withheld from your paycheck, according to Eric Smith, an IRS spokesman:

• You’ve itemized in the past but might now opt to take the higher standard deduction under the new law. It’s going up to $12,000 for individuals, $18,000 for heads of households and $24,000 for married couples filing jointly.

• You are a two-wage-earning household.

• You have a complex tax situation.

• You have a significant amount of outside income not covered by withholding.

• You receive a pension. If you use the IRS calculator, treat your pension income like it’s a paycheck, Smith said. Or use the worksheet on form W-4P Withholding Certificate for Pension or Annuity Payments.

If you’re receiving Social Security, you may also need to review how much is being withheld from your monthly benefit, Smith said. In this case, you would use the worksheet on the W-4V, the voluntary withholding request form for unemployment compensation and certain federal government and other payments.