Have completed the new forms but my initial withholdings feel low. Previous employer withheld ~14.7% (calculated by dividing Fed Withholding amount from Fed Taxable wages) but after moving to a new job the Federal withholding has dropped to ~8.6% (using same formula). Last year we did receive a refund but not a huge one so something feels off.
This could be due to the amount of income received per pay period. Withholdings are also based on the amount of income as well as other factors and reflect tax brackets. If you income is lower on the new job, it may reflect a decreased tax rate therefore, less taxes being withheld.
Also, if you have a regular Retirement plan (not a Roth) that you are now contributing to, it will reduce your taxable income which affects your tax bracket.
Here is a great TurboTax tool to assist with calculating withholding below:
Thanks!! As it turns out that check - where the withholdings dipped - was a 'partial' check as the payroll was only for a few days versus a full pay period. I'll check the next paycheck to see if the withholdings jump back up to the previous levels
Hello Wyldthng18!
Generally speaking an employer will withhold taxes as if this is your only source of income for the year. This is why it is extremely important to fill out the W4 very carefully.
You see a new job has no idea, what other jobs, or income you may have. You can let them know by filling out a new W4, and making adjustments as needed in steps 2 and 4 of the form. (Form W4)
I would also suggest seeing where you are currently to get an estimate of where you are now to see if you need to make further adjustments to ensure you will not be surprised at tax time.
Thank you for joining us today and have a great rest of your day!
Terri Lynn, EA
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