Payroll is one of the most routine parts of running a business, but it also touches one of the most personal areas for employees: their take-home pay.
As the year progresses, employees should take time to review their paystubs, federal income tax withholding, state withholding, and Form W-4, Employee’s Withholding Certificate. Payroll departments can help process withholding forms and answer payroll process questions, but employees are responsible for providing accurate withholding information based on their personal tax situation.
The Internal Revenue Service (IRS) states that Form W-4 is completed by employees and given to their employer so the employer can withhold the correct federal income tax from pay. The IRS also advises employees to consider completing a new Form W-4 each year and when their personal or financial situation changes.
For employers, this creates a valuable opportunity to remind employees to review their pay information before year-end, especially if they experienced a major life event, job change, household change, or income change.
Quick Answer: What Should Payroll Remind Employees To Review?
Payroll departments should remind employees to review their paystubs, federal withholding, state withholding, filing status, dependents, additional income, deductions, and Form W-4 elections. Employees should consider updating Form W-4 after major life events, such as marriage, divorce, birth or adoption of a child, a second job, or other financial changes.
The IRS Tax Withholding Estimator can help employees decide whether they should change their federal income tax withholding and can generate a pre-filled Form W-4 to provide to an employer or payroll system.
Why Payroll Communication Matters
Employees may not think about withholding until they file their tax return. By then, it may be too late to make meaningful paycheck adjustments for that tax year.
A payroll reminder can help employees understand that withholding is based on two main factors:
- How much they earn
- The information they provide on Form W-4
The IRS explains that federal income tax withholding depends on wages earned and the information employees give their employer on Form W-4.
For payroll departments, this is not about giving personal tax advice. It is about helping employees know when to review their information, where to find IRS resources, and how to submit updated payroll forms if needed.
What Employees Should Check On Their Paystub
A paystub review can help employees confirm whether their paycheck information still reflects their current situation.
Employees should review:
- Federal income tax withholding
- State income tax withholding
- Filing status used for withholding
- Year-to-date wages
- Year-to-date taxes withheld
- Pre-tax benefit deductions
- Retirement plan contributions
- Health savings account or flexible spending account deductions
- Additional withholding amounts
- Name, address, and personal information
If something looks outdated or does not align with the employee’s current situation, the employee may need to review Form W-4, state withholding forms, or other payroll records.
Payroll Reminder: Life Events Can Affect Withholding
Major life events can affect tax filing status, withholding, tax credits, and paycheck calculations. Payroll departments can encourage employees to review withholding after these events.
Marriage
Marriage can affect filing status, household income, tax brackets, and eligibility for certain credits or deductions. Newly married employees may need to review Form W-4, especially if both spouses work or if either spouse has more than one job.
Employees should also review whether they need to update their name, address, benefits, direct deposit information, or emergency contact information through payroll or Human Resources.
Birth Or Adoption Of A Child
The birth or adoption of a child may affect tax credits and dependent information. Employees may need to update Form W-4 if they want withholding to reflect child-related credits.
This is also a good time for employees to review payroll-related benefit elections, dependent care options, health coverage, and other workplace benefits.
Divorce Or Legal Separation
Divorce or legal separation can affect filing status, household income, dependents, and withholding. An employee who previously selected married filing jointly on Form W-4 may need to submit an updated form.
Employees may also need to update direct deposit, benefits, beneficiary information, emergency contacts, and address information.
Death Of A Spouse Or Family Member
The death of a spouse or family member can affect filing status, benefits, dependents, and future withholding. Employees may need to review Form W-4, beneficiary information, health coverage, and other payroll or benefit records.
Because the tax impact can vary, employees should consider speaking with a tax advisor about filing status and withholding after a loss.
Job Changes, Second Jobs, Or Side Income
A new job, second job, spouse’s job change, bonus, commission, or side business can affect withholding. Form W-4 includes sections for multiple jobs, spouse income, credits, deductions, other income, and additional withholding.
Employees with more than one income source should take extra care when completing Form W-4 because payroll only withholds based on the information available to that employer.
Can Payroll Advise Employees On Head Of Household?
Payroll departments should generally avoid telling an employee which filing status to select. However, payroll can direct employees to IRS resources and explain that the filing status selected on Form W-4 should generally reflect the filing status the employee expects to use when filing their tax return.
An employee may select head of household on Form W-4 if they reasonably expect to qualify for head of household filing status on their tax return.
The IRS generally describes head of household as a filing status for taxpayers who are unmarried or considered unmarried, paid more than half the cost of keeping up a home, and had a qualifying person live with them for more than half the year, unless an exception applies.
Head Of Household Payroll Checklist
Payroll teams can encourage employees to review IRS guidance if they believe head of household may apply.
Employees may want to review head of household status if they expect all of the following to apply:
- They are unmarried or considered unmarried on the last day of the year
- They paid more than half the cost of keeping up a home for the year
- A qualifying person lived with them for more than half the year, unless an IRS exception applies
- They expect to file their tax return using head of household status
Because head of household rules are fact-specific, employees should review IRS Publication 501 or consult a tax advisor before changing Form W-4 based on that status.
Federal & State Withholding Require Separate Attention
Form W-4 applies to federal income tax withholding. State withholding may require a separate state form, and requirements vary by state.
This is important for employees who:
- Moved during the year
- Work in one state and live in another
- Started remote work
- Changed job locations
- Had a spouse change jobs
- Need to update state filing status or allowances
A federal Form W-4 update does not necessarily update state withholding. Employees should check with payroll or their state tax agency to confirm which state form is needed.
Payroll Records Employees May Need To Update
Withholding is only one part of a payroll checkup. Employees should also review payroll and benefit records when life changes occur.
Employees may need to update:
- Form W-4
- State withholding forms
- Name
- Address
- Direct deposit
- Emergency contacts
- Benefit elections
- Dependent information
- Retirement plan contributions
- Beneficiary designations
- Health savings account contributions
- Flexible spending account elections
Keeping payroll records current can help reduce administrative issues and support smoother payroll processing.
What To Gather Before Updating Form W-4
Before using the IRS Tax Withholding Estimator or submitting an updated Form W-4, employees should gather:
- Most recent paystub
- Spouse’s most recent paystub, if married
- Most recent tax return
- Information about second jobs or side income
- Estimated credits and deductions
- Dependent information
- Other taxable income
- State withholding information, if applicable
The IRS Tax Withholding Estimator is designed to help individuals with income from a job, pension, or annuity that withholds federal income tax. The estimator can help employees complete a new Form W-4 or Form W-4P to give to an employer or pension provider.
Common Payroll Withholding Issues To Watch For
Payroll teams may see withholding issues when employees do not update forms after major changes.
Common issues include:
- Outdated filing status
- Old address on file
- Name change not updated
- State withholding not updated after a move
- Multiple jobs not reflected on Form W-4
- Spouse income not considered
- Dependents not reviewed
- Extra withholding no longer needed
- State withholding form missing or outdated
- Payroll records not updated after divorce or separation
These items do not automatically mean withholding is incorrect, but they are good reasons for an employee to review their paystub and payroll records.
Employer Considerations For Payroll Teams
Payroll departments can support employees by offering reminders and process guidance without providing individualized tax advice.
Employers may want to:
- Send an annual paystub review reminder
- Remind employees to use IRS resources
- Provide links to Form W-4 and state withholding forms
- Explain how to submit payroll updates
- Remind employees that payroll cannot choose a filing status for them
- Encourage employees to speak with a tax advisor for personal tax questions
- Review payroll system instructions for updated withholding forms
- Keep employee withholding forms according to record retention policies
The IRS Employer’s Tax Guide states that employers withhold federal income tax from wages according to the employee’s Form W-4 and the federal withholding procedures in IRS Publication 15-T.
FAQ
What Is Payroll Withholding?
Payroll withholding is the amount withheld from an employee’s wages for taxes and other deductions. Federal income tax withholding is based on the employee’s wages and the information provided to the employer on Form W-4.
Who Is Responsible For Updating Form W-4?
The employee is responsible for completing and submitting Form W-4. The employer uses the form to calculate federal income tax withholding through payroll.
Can Payroll Tell Employees What To Put On Form W-4?
Payroll can explain the process and direct employees to IRS resources, but payroll should not choose filing status, dependent amounts, credits, deductions, or additional withholding for an employee.
When Should Employees Update Payroll Records?
Employees should update payroll records after major life or financial changes, such as marriage, divorce, birth or adoption of a child, address changes, direct deposit changes, benefit changes, job changes, or state residency changes.
Does Form W-4 Update State Withholding?
Not necessarily. Form W-4 applies to federal income tax withholding. State withholding may require a separate state form.
Payroll Checkup: A Good Year-End Reminder
A payroll checkup is a practical way for employees to review whether their paystub, withholding, and payroll records still match their current situation. Marriage, children, divorce, death of a spouse, job changes, second jobs, remote work, and state changes can all affect payroll and tax withholding.
Payroll teams can help employees know where to find forms, how to submit updates, and when to review their information. Employees should use IRS resources and consult a tax advisor for personal tax questions.
KPM can help businesses manage payroll processes, maintain accurate records, and support year-round planning conversations. Contact us today.
