Tax withholding is designed to collect taxes throughout the year, but it often fails to match actual tax liability. Under withholding is common for taxpayers with multiple jobs, bonuses, commissions, or side income.
Withholding issues frequently arise when tax forms are not updated after major life changes. Marriage, divorce, having children, or changing jobs can all affect tax liability.
Bonuses and commissions are often withheld differently than regular wages, which can contribute to under withholding. Side income may not have any withholding at all.
When withholding is insufficient, taxpayers may owe taxes at filing time even though taxes were taken from paychecks. Reviewing withholding periodically helps identify problems early.
Adjusting withholding proactively supports better financial planning and smoother tax seasons.