IRS Is Urging Workers to Check Their Withholding Right Now: How an Error Could Cost You at Tax Time

On September 4, 2026, the IRS published IR-2026-105, calling on workers and employers to review withholding and payroll tax responsibilities ahead of National Payroll Week, observed September 7 through 11. If you have been ignoring the numbers on your pay stub, this is the nudge to stop doing that. A wrong withholding amount in either direction quietly causes problems that show up as a shock at filing time, and with only three months left in the tax year, you still have time to fix it.

What “Withholding” Actually Means and Why It Matters Right Now

Every time you get a paycheck, your employer pulls out a portion of your earnings and sends it to the IRS on your behalf. That amount is your federal income tax withholding, and it is controlled by the Form W-4 you filled out when you were hired. The problem is that most people fill out a W-4 once and never look at it again, even as their income, family situation, or tax law changes year after year.

The IRS tax system works on a pay-as-you-go basis. You are required to pay most of what you owe throughout the year, not in one lump sum when you file. If not enough is taken out of each paycheck, you end up short at filing time, and that shortfall can come with a penalty on top of the balance you owe.

National Payroll Week, presented by PayrollOrg, exists in part to prompt exactly this kind of review. According to the IRS’s release, the observance gives both workers and employers a reason to look more closely at paycheck accuracy and payroll responsibilities before the calendar runs out.

The Two Problems: Too Little Withheld and Too Much

Under-withholding: the expensive problem

If your employer withholds too little federal income tax from your paychecks, you will owe the difference when you file. That alone can be jarring. But the IRS may also add an underpayment penalty, calculated at the federal short-term interest rate plus 3 percentage points. For 2026, that rate has been running at 7% for the first quarter, and the penalty accrues daily on the outstanding balance. It is not a flat fine. It builds from the quarter in which the shortfall first occurred, so the earlier in the year the gap opened, the more it compounds by filing day.

You can generally avoid this penalty if your total withholding and estimated payments cover at least 90% of what you owe for 2026, or 100% of the tax shown on your 2025 return (110% if your adjusted gross income exceeded $150,000 last year). If neither threshold is met, Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, is how the IRS calculates what you owe.

Over-withholding: the less painful but still costly problem

The opposite situation is less frightening but still costs you. When too much is withheld, you get a refund in the spring. That feels good, but it means you gave the government an interest-free loan with your own money for months. If you got a large refund last year and nothing in your life has changed, your withholding is probably set too high, and money that could be in your pocket each month is sitting with the IRS instead.

Why This Year Is a Little Different

The 2026 Form W-4 was updated to reflect changes brought in by new federal tax legislation. If you earn tips or overtime pay, bought a qualifying vehicle, or are 65 or older, new deductions may now apply to you that could change how much you should be withholding. A W-4 you filled out before these changes took effect may no longer produce the right result. The IRS Tax Withholding Estimator was also updated in March 2026 specifically to account for these legislative changes, which makes this a good moment to run the numbers again even if you updated your W-4 recently.

The IRS also highlighted a free webinar held during National Payroll Week covering 2026 Form W-2 reporting changes and federal employment tax topics. If you are a small business owner who handles your own payroll, those changes are worth knowing about before year-end processing begins.

How to Check Your Withholding in About 15 Minutes

The IRS provides a free tool called the Tax Withholding Estimator, available at IRS.gov/W4App. You will need your most recent pay stub, your most recent federal tax return, and estimates of any other income you expect this year, such as freelance pay, rental income, or investment gains. The estimator tells you whether your current withholding is on track, too high, or too low, and gives you the information you need to fill out a corrected Form W-4.

Once you have completed a new W-4, you give it to your employer, not to the IRS. The change typically takes effect within one or two pay periods. A few common situations that signal your W-4 probably needs attention right now:

• You got married, divorced, or had a child since your last W-4
• You or your spouse started a second job this year
• You started earning freelance or gig income alongside your regular wages
• You received a large refund last spring and want more take-home pay now
• You owed a significant balance last April and want to avoid repeating that
• You earn tips or overtime that may now qualify for new deductions

If you have income that is not subject to withholding at all, such as self-employment, rental, or investment income, withholding adjustments alone may not be enough. You may need to make a fourth-quarter estimated tax payment before January 15, 2027 to cover that portion of your liability.

If You Already Owe the IRS, Do Not Wait

Fixing your withholding going forward is the right move, but it does not erase a balance you already have. If you owe from a prior year, are behind on filing, or are already dealing with IRS notices or collection activity, a withholding check is only part of the picture. Interest and penalties on existing balances continue to grow every day they are unresolved.

The IRS does offer programs for taxpayers who cannot pay in full. Depending on your circumstances, you may qualify for an installment agreement, an offer in compromise, or other relief options. These programs have specific eligibility rules, and the right approach depends heavily on your individual situation, including what you owe, your income, your assets, and whether you are current on filing.

What to Do Next

Start with the IRS Tax Withholding Estimator at IRS.gov/W4App. Run the numbers now, while there are still enough pay periods left in 2026 to make a meaningful adjustment. If the estimator shows you are on track, that is peace of mind worth having. If it shows a gap, submitting a corrected W-4 today is far better than discovering the problem in April.

If you already have a tax debt, unfiled returns, or IRS notices you have been putting off, the team at Clear Start Tax can review your full situation and help you understand what resolution options may be available. Acting now, before year-end, gives you the most options. Waiting until the IRS escalates the matter reduces them.