Tax Tip for College Grads – Maximize Paychecks with Part-Year Withholding

Tax Tip for College Grads – Maximize Paychecks with Part-Year Withholding

The standard federal tax withholding tables are based on the assumption that individuals will earn a full year’s income, potentially leading to higher tax withholding amounts. However, for college grads beginning employment mid-year, this assumption may not accurately reflect their actual earnings.

The part-year withholding method is specifically designed for people who work 245 or fewer days in a year. It sets withholding according to what individuals earn during the part of the year they are actively employed. This tax-saving strategy may be advantageous as a way to boost an individual’s paycheck and have less tax withheld.

To benefit from this tax-saving strategy, individuals should request the part-year withholding arrangement in writing from their employers. This straightforward step will enable employers to adjust withholding based on the part-year method, optimizing earnings during this period.

For more comprehensive information on implementing the part-year employment method, individuals can refer to page 65 of the 2023 IRS Publication 15-T. This publication contains detailed guidelines and insights on adjusting withholding effectively.