Press

By: Natalie Colley

May 30, 2023

“Just enter 0” is no longer sage advice to those filling out tax form W-4, the form that tells your employer how much in taxes to withhold from your paycheck.

My first indication that something had changed was an email from my Human Resources administrator after my company changed payroll administrators last month, alerting me that “your net pay decreased by almost $240” per paycheck. No, I was not demoted, there were no changes to my 401k contribution rate, and our healthcare expenses were actually decreasing with this change. All else being equal, I should have had $100 more in my pocket each paycheck. To add insult to injury, I had just finalized my taxes and owed only $200 to the federal government, which is about as spot-on as you can get. I’m not one to over-analyze the minutiae in my personal finances, but this has been needling me for the past month, each time I receive a paycheck that is substantially lower than it was the month before.

The traditional financial advice is to minimize your tax withholdings such that you aren’t “giving the government an interest-free loan,” but no one enjoys owing the government a substantial amount at tax time, myself included. That being said, the extra withholding per paycheck put me on track for an unnecessarily large tax refund. Intrigued, I embarked on an unexpected quest to unravel the secrets of precise tax withholding estimation.