IRS Urges Taxpayers to Adjust Withholding Early in 2025 to Avoid Surprises

The IRS is reminding taxpayers to check their federal income tax withholding now to avoid unexpected tax bills or refunds when filing their 2025 returns next year. This proactive measure is especially important for individuals whose financial or employment situations have changed recently.

Why Withholding Adjustments Matter

Federal tax withholding determines how much tax is deducted from your paycheck throughout the year. If too little is withheld, you may owe the IRS when you file. If too much is withheld, you may receive a refund — but that money could have been available to you sooner.

The IRS recommends performing a "paycheck checkup" to make sure your current withholding aligns with your expected tax liability. This is especially important if:

• You received a large refund or owed taxes for 2024

• You changed jobs, received a promotion, or adjusted your income streams

• You started or ended freelance or side income

• Your family situation changed (marriage, divorce, dependents)

• You are self-employed or own a pass-through entity

  
  

How to Adjust Withholding

The IRS provides a free online Tax Withholding Estimator tool to help individuals determine whether their current paycheck withholding is appropriate.

Steps to take:

1. Use the IRS Withholding Estimator

2. Review your most recent pay stub and tax return for accurate inputs

3. Submit a new Form W-4 to your employer if changes are needed

4. Recheck your withholding mid-year if your situation changes again

   
   

Why This Matters in 2025

With tax reform under debate in Congress, the 2025 tax year may see structural changes in rates and deductions. Adjusting withholding now helps individuals avoid last-minute surprises, penalties, or missed opportunities to smooth cash flow throughout the year.

For tax professionals and small business owners, this is a great time to reach out to clients and employees with guidance on optimizing their tax profile in real time.

Final Thought

Withholding isn’t a set-it-and-forget-it calculation. Small changes now can prevent larger headaches later. Bizora AI recommends reviewing your strategy early in the year — and checking again if your life or income changes significantly.

Stay informed. Stay proactive. Let Bizora AI help you stay ahead of what’s next.