part-year tax withholding

What is Part-Year Tax Withholding?

The part-year tax withholding method allows your employer to adjust the amount of taxes that are withheld from your paycheck, so you don’t wind up overpaying up front. If you start a new job late in the year or you take a seasonal job, the normal method an employer uses to withhold earnings would result in too much money being withheld from your paycheck.

For example, you have a temporary job and get paid $15,000 for three months of work. The normal method assumes that you are earning $5,000 every month, or $60,000 a year ($5,000 x 12 = $60,000). In reality, you are only earning $5,000 per month for three months. If your employer agrees to part-year tax withholding, they will report your total $15,000 as if it were earned over the course of the entire year. This measures out to $1,250 per month ($15,000 / 12 = $1,250).

Am I eligible for part-year withholding?

You are eligible for part-year tax withholding if you are employed for less than 245 days during the current calendar year.

If you work a summer job, seasonal job, holiday job, or have temporary work, you should consider the part-year method. Also, if you are starting a new job late in the calendar year, this will prevent over-withholding from your paycheck.

Otherwise, your employer automatically calculates the amount of tax withheld from your paycheck based on a full year’s earnings.

What is over-withholding?

Over-withholding is when too much income is withheld in taxes throughout the year. On one hand, it does typically result in a large refund on your tax return. While some people like receiving a significant refund, others would rather see the “extra” money in their paycheck from month to month.

How do I avoid over-withholding?

Check your W-9 to make sure you are selecting the correct number of allowances. Also consider using part-year tax withholding if you work a contract, seasonal, or summer job. This will prevent over-withholding by calculating your monthly payments on a smaller amount of income.

How do I know if I’m withholding too much?

Use the IRS’s Withholding calculator to perform a “paycheck checkup” to make sure the right amount is being withheld from your paycheck. Estimate your 2018 income along with other items, like the number of dependents, to see if you should ask for part-year tax withholding.

How can I change to part-year withholding?

If you work a seasonal or contract job and you worry that too much income will be withheld from each paycheck, submit a written request to the IRS. It should include:

  • Your last day of employment with that employer.
  • Verification that you will not be employed for more than 245 days during the calendar year in question.
  • A statement that claims you will use the calendar year as your tax year instead of the fiscal year.

This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.