Tax Tip 2025-28: Taxpayers should check their withholding now to prepare for next year

IRS Tax Tips

April 22, 2025

Issue Number: Tax Tip 2025-28

Taxpayers should check their withholding now to prepare for next year

Proper tax withholding now is key to avoiding surprises when taxpayers file next year. Making any needed adjustments early means taxpayers won’t have to make a big change later in the year to catch up

The IRS Tax Withholding Estimator is a free online tool that helps workers, independent contractors and retirees determine if they have the right amount of federal income tax withheld from their paychecks. Using it can prevent taxpayers from having an unexpectedly large tax bill or a substantial refund when they file in 2026.

How the IRS Tax Withholding Estimator helps taxpayers plan ahead
Taxes are pay-as-you-go, which means taxpayers need to pay their tax as they receive their income. They do this through withholding.

For employees, “withholding” refers to the federal income tax portion of each paycheck that an employer takes out for tax purposes. It can also mean the amount from earnings self-employed people and others voluntarily set aside to pay their estimated taxes.

After using the Tax Withholding Estimator, taxpayers can determine if they need to submit an updated Form W-4, Employee’s Withholding Certificate, to their employer or adjust the amount they voluntarily set aside for tax purposes.

By adjusting tax withholding, taxpayers can:

Prevent owing money and potential penalties at tax time.
Adjust withholdings to increase take-home pay instead of waiting for a refund.

Use the tool once a year
By using the estimator once a year, taxpayers can manage their estimates based on any personal life change, such as buying a home, changing jobs, having a child or changing their marital status.

For people who recently completed their 2024 tax return, the IRS advises using the IRS Tax Withholding Estimator to consider all income sources such as full-time wages, side jobs and any sale of services or commodities typically reported on Form 1099-K.

Required documents
For an effective tax withholding estimate, taxpayers will need certain documents including:

All income statements, including those of their spouse if filing jointly
Data from other sources of earnings
Their most recent income tax return

Publication 505, Tax Withholding and Estimated Tax, provides instructions for taxpayers with complex tax situations that are difficult to solve through the IRS Tax Withholding Estimator. These cases may involve taxpayers responsible for the alternative minimum tax or other taxes and those with long-term capital gains or qualified dividends.

More information
Tax Withholding Estimator FAQs

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Issue Number: Tax Tip 2025-28