If you find yourself with a few minutes of free time during these cold winter days, you should take a look at your pay stub to make sure your deductions and withholdings are up to date and squared away.
I think the following pay stub items should be checked at least annually:
- Federal and state status and exemptions – You set these when you complete form W-4 for your employer. These determine how much tax your employer withholds from your pay. You probably should adjust these if your tax returns show a large refund or if you owe a large amount. You can make these changes online with your employer or turn in a revised W-4 to HR.
- Deductions – Check that the correct amount is being taken out for your retirement plans and group insurance plans. I have seen too many times where an employee changes their 401k contribution, but it never gets changed in the system. Again, these can typically be changed online on your benefits’ website.
- Employer Contributions – Make sure your employer is contributing where they are supposed to. Employer matching for retirement plans and insurance premiums are two of the most common employer contributions that you should verify are correct.
The IRS even has a page on their site that you can use to help you figure out what your withholdings (marital status and exemptions on your W-4) should be based on your current pay stub and previous year’s tax filings. Here’s the link: https://www.irs.gov/paycheck-checkup
The IRS say that the following circumstances warrant a check of your withholdings:
- Are a two-income family
- Have two or more jobs at the same time
- Work a seasonal job or only work part of the year
- Claim credits like the child tax credit
- Have dependents age 17 or older
- Itemized deductions on your returns
- Have high income or a complex tax return
- Had a large tax refund or tax bill this past year
Now is a good time to review these items because if there are mistakes, there is enough time left in the year to rectify the situation. Also, if you wait until the end of the year, it will be much harder to find the time during the holiday season.
Please comment or send an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
