Getting a Summer Job? IRS recommends a “Paycheck Checkup”
The Internal Revenue Service (IRS) recently published a newsletter encouraging workers with more than one job to conduct a paycheck checkup. The checkup involves reviewing withholdings to ensure that the taxpayer is paying enough to cover tax obligations.
Why do I need to have withholdings? The United States tax system is one that requires incremental payment, a pay-as-you go system. The government expects taxpayers to make payments either through paycheck withholdings or with estimated tax payments every quarter.
Due to the tax law changes that went into effect with the Tax Cuts and Jobs Act (TCJA) last year, the IRS notes those with multiple jobs are at a higher risk of not having the right amount withheld from their paychecks. The agency is also increasing its focus on those who partake in the sharing economy. As such, anyone with a side gig working for Uber, Etsy or a similar vendor is wise to make sure they are meeting their tax obligations.
What happens if I do not make tax payments throughout the year? You can face a stiff penalty and potentially put yourself at an increased risk for an audit.
How do I make sure my withholding is correct? The IRS offers a “withholding calculator” on its website. This tool can help you understand if you need to make adjustments. In most cases, it is a good idea to withhold approximately 90 percent of estimated income taxes from your paycheck. If adjustments are needed, you can submit a new Form W-4.