Nearly half of Americans may have no clue how much tax is withheld from their paychecks
One in 10 Americans had never heard of a Form W-4
A surprising number of American workers may regularly have an inaccurate amount taxes withheld from their paychecks – and have no idea.
A new survey conducted by the American Institute of CPAs and The Harris Poll found that 45% of people could not identify the last time they updated their withholding son their Form W-4 – despite a multitude of changes to both documents and tax laws throughout recent years.
Only about 26% of people had updated their withholding since the IRS released a new Form W-4 in 2019. That puts people in an unfavorable situation because when inaccurate tax amounts are withheld from paychecks some could unexpectedly end up owing at the end of the year.
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Overpaying in taxes throughout the year – or, in other words, having too much withheld – means a worker will receive a refund when they file. However, underpaying means an individual owes the IRS and could lead to a penalty.
“People tend to overlook a few extra bucks in their take-home pay, but they sure notice when they get a $300 tax bill instead of a $1,500 refund,” Gregory J. Anton, chairman of the AICPA’s National CPA Financial Literacy Commission, said in a statement. “This underscores why understanding and updating your tax withholding is so important-- it directly impacts your budget.”
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Surprisingly, 37% of people admitted they were completely unfamiliar with the form – 11% said they had never even heard of it.
Being unfamiliar with the Form W-4 could be bad for remote workers next year.
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As previously reported by FOX Business, some employees could be in for a tax surprise depending on their work situation during the pandemic.
Experts have advised individuals working in different states or other abnormal situations to contact their human resources and payroll departments to let them know what has changed. That’s because the state where your employer is having your taxes withheld may need to be adjusted – a situation that could pose a problem for both you and your employer if it is not corrected by next year.
Workers may want to keep a log of where they physically were and for how long because if an audit were to be initiated the burden of proof ultimately falls on the taxpayer.