Red Flags: Your Withholding Is Too Low
- Red Flag: You owed more than $1,000 in taxes last April — and an underpayment penalty was assessed
- Red Flag: You started a second job this year without updating either W-4
- Red Flag: Your spouse started working without adjusting either of your W-4s
- Red Flag: You started earning significant freelance income this year and haven’t added it to Step 4a
- Red Flag: You received a large bonus and the combined income pushed you into a higher bracket
- Red Flag: You sold stocks with significant capital gains and haven’t adjusted withholding
Under-withholding red flags and quick fixes
| Red Flag | Likely Annual Shortfall | Quick Fix |
|---|---|---|
| Owed $1,000+ last April | $1,000+ ongoing | Increase Step 4c extra withholding |
| New second job, no W-4 update | $1,000–$4,000 | Check Step 2 box on lower-paying job W-4 |
| Spouse returned to work, no W-4 update | $1,500–$4,000 | Check Step 2 box on one W-4 |
| Freelance income not in Step 4a | $3,000–$8,000 | Add net SE income to Step 4a + SE tax to Step 4c |
| Large stock sale gains this year | $2,000–$8,000+ | Add estimated capital gains to Step 4a; IRS estimator recommended |
Red Flags: Your Withholding Is Too High
- Red Flag: You received a refund over $2,000 last year without any unusual circumstances
- Red Flag: You have children but never claimed them in Step 3 of your W-4
- Red Flag: You now itemize deductions significantly (mortgage interest, state taxes) but Step 4b is blank
- Red Flag: You no longer have a second job but the W-4 from when you did still has Step 2 checked
- Red Flag: You’re using a W-4 from 5+ years ago without ever updating it
Check Your W-4 for These Red Flags
Enter your current situation to see if your withholding matches your tax liability — or whether a red flag adjustment is needed.