Overview
When you enter W-2 wages and withholding in your Quarterly Tax Checklist, we’ll display information about your withholding compared to what we typically see. This isn’t necessarily a problem, but it could point to a need to increase your withholding, especially if your quarterly estimated tax is higher than you’d like. Additional W2 withholding helps reduce your tax liability, which can lower your quarterly tax payments.
Understanding the withholding alert in Heard
When you enter your YTD withholdings, we utilize an internal calculator to calculate the percentage of the tax withheld from your income. As general guidance, we recommend withholding 15% for federal taxes so you don't have too much or too little federal income tax withheld. The 15% is based on what should be withheld each paycheck to put you in a good spot come annual tax time, though this is just a rule of thumb, and the exact amount may vary based on your specific tax situation.
What this means for the quarterly checklist
For the quarterly estimated tax, you will need to enter the actual amounts that were withheld from your paycheck YTD, regardless of whether too little or too much tax was withheld. This ensures we accurately calculate your estimated tax owed for that quarter.
You shouldn’t modify what was actually withheld when entering your W2 wages and withholding in Heard, as we need to know what was actually withheld to accurately estimate your quarterly estimated tax.
How to check withholding
The IRS Tax Withholding Estimator can help you determine how much federal income tax should be withheld from your pay. This tool makes it easier to understand the right withholding amount for you, especially if you have income from multiple jobs, itemized deductions, and other tax benefits.
The IRS recommends checking withholding early in the year if tax law changes or when life changes occur. If you see the tooltip, we recommend calculating your withholdings using the IRS Tax Withholding Estimator.
How to change withholding
If you would like to change your withholding amounts based on the IRS estimator's results, please notify your payroll provider or your employer. You will need to complete a new Form W-4. We recommend taking care of this right away, as adjustments could take up to a few weeks to be reflected on your paycheck.
For Heard Payroll and Gusto customers, here are the steps to navigate you through the process: View and update Form W-4 (withholding elections) in Gusto.