Am I required to pay income taxes?

This accounting guide was developed by Metro Accounting And Tax Services, CPA to help individuals and small businesses determine whether they are required to pay income tax. For all your accounting and tax related issues let us be your partner along the way.

The federal income tax system is a pay-as-you-go tax system. There are two ways to pay as you go:

1)    Through withholding

2)    Through estimated tax payments


If you are an employee, your employer probably withholds income tax from your pay. This is done when you fill out the W-4 form when you were initially employed. The amount of taxes your employer withholds depends on:

a)    The amount of your earnings

b)    The information on Form W-4: 1) your marital status –  married or single, 2) number of allowances claimed and 3) if you want additional amounts to be withheld.

c)    If you did not fill out a Form W-4 at the commencement of employment, your employer must withhold at the highest tax rate as if you were single individual and claimed no allowances.

Apart from salaries and wages, taxes may also be withheld from other income you received over the period. These include pensions, bonuses, commissions, and even gambling winnings. Any amounts withheld is paid to the IRS on your behalf.

New Job

When you start a new job, you are required to fill out IRS Form W-4 and give it to your employer. If you need to change the information later, you must fill out a new W-4 to effect any changes.

If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. You may be able to avoid over-withholding if your employer agrees to use the part-year method.

Changing Your Tax Withholding

Events during the year may change your marital status or the number of exemptions you claimed initially, adjustments, deductions, or credits you expect to claim on your return. When this happens, you may need to give your employer a new Form W-4 to effect those changes.

Life Events

If a life event changes your withholding status or the number of allowances you are claiming, you must give your employer a new Form W-4 within 10 days after either of the following.

  • Your divorce, if you have been claiming married status.
  • Any event that decreases the number of withholding allowances you can claim.

Generally, you can submit a new Form W-4 whenever you wish to change the number of your withholding allowances for any other reason. However, pay special attention to changing your withholding for the current year if such changes are due to events that occurred last year. If events in the prior year will cause a decrease in the number of your withholding allowances for this year, you must give your employer a new Form W-4 by December 1 of the prior year. If the event occurs in December of the prior year, submit a new Form W-4 within 10 days.

Having More Than One Jobs

If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split your allowances between the Forms W-4 for each job. You cannot claim the same allowances with more than one employer at the same time. You can claim all your allowances with one employer and none with the other, or divide them any other way.

Married Filing A Joint Return

If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Use only one set of worksheets. You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims.

Married Filing Separate Returns

If you and your spouse expect to file separate returns, each person would figure their allowances separately using the worksheets based on their own individual income, adjustments, deductions.

Getting the Right Amount of Taxes Withheld

The taxes withheld from your pay will in most cases be very close to the taxes you calculated on your return if:

  • You accurately complete all the Form W-4 worksheets that apply to you.
  • You give your employer a new Form W-4 when changes occur.

But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations.

  • You are married and both you and your spouse work.
  • You have more than one job at a time.
  • You have non-wage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income.
  • You will owe additional amounts with your return, such as self-employment tax.
  • Your withholding is based on obsolete Form W-4 information for a substantial part of the year.


A person can elect to be exempted from withholding for the current year only if both the following situations apply.

  • For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability.
  • For the current year, you expect a refund of all federal income tax withheld because you expect to have no tax liability.

It is important to note that exemption from withholding only relates to federal income tax and not to Medicare or Social Security.

For all your accounting and tax related issues call the office @ 470-240-5143.

User | 1/10/2017