Understand the federal income tax on your paycheck

The amount of income tax you pay depends on a few things. The two most important are your W-4 and your yearly income.

In this article, we’ll answer some common questions about income taxes. 

Why's the federal withholding zero on my paycheck?

In January 2020, the IRS released a new W-4 and increased the Standard Deduction. These changes lowered the amount of federal withholding on your paycheck. Even if money was taken out before, it could be $0 now.

Why's income tax being taken out of my paycheck now?

It all boils down to the new W-4. Maybe you changed jobs, or maybe you just reviewed the form at the beginning of the year. If you updated your W-4 or filled out a new one, you are now subject to new IRS withholding rules.

The new IRS calculations leave you with more money throughout the year. This means you’ll get less of a refund at the end of the year when you file your taxes.

Will income taxes always impact my paycheck?

Your wages may not meet the minimum requirement to have any federal withholding taken out.

For example, your filing status is Single, and you get paid every two weeks. You have to make at least $598.12, before any federal withholding is taken out. 

Why's the federal withholding different for each paycheck?

Tax calculations annualize each paycheck. If you are an hourly employee, and your hours vary paycheck to paycheck, your federal income tax amounts will also vary.

Let’s say you got paid $500 this week, and you normally get paid every two weeks. The federal income tax calculation would be based on a salary of ($500 x 26) $13,000. If you file as Single, per IRS guidelines, you wouldn’t have any federal withholding taken out. Suppose that next payday you get paid $1,000. In that case, the federal income tax calculation is based on a salary of ($1,000 x 26) $26,000. That amount would have taxes withheld.

You can check out this IRS Publication 15-T to learn more about your calculations.

How do I verify or change the income tax on my paycheck?

If you have correctly filled out your W-4, and nothing has changed, your deductions are correct. If you want to set up extra ‌withholding, review and update your W-4, or provide a new W-4 to your employer at any time.

Next step 

Learn how to automatically estimate your income tax.