Why your clients need a mid-year withholding checkup

Encouraging clients to review their tax withholding mid-year has always been sound practice. But in 2026, it’s arguably more important than ever.

The One, Big Beautiful Bill (OB3) introduced new and enhanced deductions beginning in tax year 2025, deductions that some of your client’s current W-4 elections do not yet reflect. As their trusted advisor, you are in the best position to ensure clients aren’t leaving money on the table, or setting themselves up for an unexpected tax bill.

The pay-as-you-go problem

Federal income tax is a pay-as-you-go system. For employees, that means federal tax is withheld from each paycheck throughout the year based on the instructions they’ve given their employer on Form W-4. If those instructions are out of date due to a life change, new tax law, or simply because the client never revisited the form, they can end up significantly over- or under-withheld by December 31.

Under-withholding leads to a tax bill at filing time and, potentially, an underpayment penalty. Over-withholding means the client has been making an interest-free loan to the government all year instead of keeping that cash in their own pocket.

OB3 deductions that change the equation

OB3, enacted in 2025, permanently extended the individual income tax rates established under the Tax Cuts and Jobs Act (TCJA) and introduced several significant new deductions. Because many of these provisions took effect for tax year 2025 and remain in place through at least 2028, clients may need to submit a new Form W-4 now to have the right amount withheld for the remainder of the year.

The IRS has published dedicated guidance on updating withholding for OB3 changes, and it’s worth walking clients through each provision that may apply to them. For a rundown of components of the OB3, including no tax on tips, no tax on overtime, senior deductions, and more, check out the Intuit® Tax Pro Center’s OB3 article archive.

Life events worth discussing

Beyond tax law changes, the usual life-event triggers for a withholding review remain just as relevant. The IRS recommends clients check their withholding whenever they experience:

• Marriage, divorce, or separation.
• Birth or adoption of a child.
• A new job or significant change in income.
• Purchase of a home, which may affect itemized deductions.
• Starting or stopping a side gig or self-employment income.

For clients who changed jobs, started freelance work, or had significant income fluctuations earlier in the year, now is also a good time to verify that payroll withholding aligns with their projected full-year tax liability.

Form W-4: What clients need to know

The current Form W-4, in use since 2020, is called the Employee’s Withholding Certificate. Unlike its predecessor, it no longer ties withholding to personal allowances. Instead, it captures dollar amounts directly. For clients who have not updated their W-4 since before 2020, it’s worth flagging that their employer may be using older withholding tables (covered in IRS Publication 15-T) that may not produce the most accurate results for current law.

For clients with complex situations such as multiple jobs, pension income, significant investment income, or alternative minimum tax exposure, Publication 505 provides more detailed guidance than the online estimator can accommodate.

For pension recipients, Form W-4P (periodic payments) and Form W-4R (nonperiodic payments and eligible rollover distributions) govern withholding from retirement plan distributions. Clients who receive pension or annuity payments should review those elections as well, particularly in light of the new senior deduction.

IRS Tax withholding estimator

For many clients, the easiest starting point remains the IRS Tax Withholding Estimator The tool takes about 25 minutes to complete and asks about income, filing status, dependents, expected credits and deductions, and withholding to date. Clients will need their most recent pay stubs and, ideally, their 2025 tax return.

The estimator does not collect personally identifiable information, and inputs are not saved or shared with the IRS. After completing the estimator, clients can generate a pre-filled Form W-4 to submit to their employer.

The estimator also includes a refund preference slider, allowing clients who prefer to receive a refund at filing to calibrate their withholding toward a target refund amount rather than simply aiming for even.

Mid-year checklist

When conducting a withholding review for clients this summer, consider working through the following:

Set a reminder for year-end. If clients update their W-4 based on 2025 OB3 provisions, the IRS recommends rechecking and updating again at the start of 2026, when the 2026 Form W-4 (which incorporates these deductions directly) can be used.

Review last year’s result. Did the client owe money or receive a large refund? Use that as a baseline for whether current withholding is calibrated correctly.

Identify applicable OB3 deductions. Walk through each new deduction to determine which ones apply to the client’s situation.

Determine the right tool. If OB3 deductions for tips, overtime, car loan interest, or the senior deduction apply, use the 2025 Deductions Worksheet. Otherwise, the online estimator suffices.

Check for life changes since the last W-4. Marriage, divorce, new dependents, job changes, or home purchases all affect optimal withholding.

Don’t overlook pension withholding. Retired clients and those approaching retirement should review Form W-4P and W-4R elections.

Flag high-income SALT itemizers. With the cap now at $40,000, many clients who previously took the standard deduction may benefit from itemizing — and should adjust withholding accordingly.

Frequently asked questions

Why is a mid-year withholding checkup especially important in 2026?

The One, Big Beautiful Bill (OB3) introduced new and enhanced deductions beginning in tax year 2025 that many clients’ current W-4 elections do not yet reflect. A mid-year review ensures clients aren’t missing out on those deductions or heading toward an unexpected tax bill.

What happens if a client’s withholding is off?

Under-withholding can result in a tax bill at filing time and a potential underpayment penalty. Over-withholding means the client has effectively been making an interest-free loan to the government instead of keeping that cash in their own pocket.

Which life events should trigger a withholding review?

The IRS recommends reviewing withholding after marriage, divorce, the birth or adoption of a child, a new job, a significant income change, a home purchase, or starting or stopping self-employment income.

How can clients check whether their withholding is accurate?

The IRS Tax Withholding Estimator is a free online tool that takes about 25 minutes to complete and guides clients through income, filing status, dependents, and expected credits and deductions. Clients will need their most recent pay stubs and, ideally, their 2025 tax return.

How does a client update their withholding after using the estimator?

After completing the IRS Tax Withholding Estimator, clients can generate a pre-filled Form W-4 to submit directly to their employer.

What should clients with complex tax situations do?

Clients with multiple jobs, pension income, significant investment income, or AMT exposure may find that IRS Publication 505 provides more detailed guidance than the online estimator can accommodate.

Do retired clients need to review their withholding too?

Yes. Clients who receive pension or annuity payments should review their Form W-4P and Form W-4R elections, particularly in light of the new senior deduction introduced under OB3.

Should clients who itemize deductions revisit their W-4?

With the SALT cap now at $40,000, many clients who previously took the standard deduction may benefit from itemizing, and they should adjust their withholding accordingly.

When should clients update their W-4 again after a mid-year change?

The IRS recommends rechecking and updating again at the start of 2026, when the 2026 Form W-4 incorporating OB3 deductions directly becomes available.

Editor’s note: This article was originally published July 15, 2020, and refreshed with new content on June 26, 2026.