Midyear is the perfect time for a financial check-in—and for many US small businesses, that includes reviewing federal income tax withholding. With IRS updates in effect for 2025, withholding amounts set earlier this year may no longer align with actual tax liability.
Taking time now to review and adjust can prevent surprises during tax season. Here’s why midyear matters—and how accounting services can help small business owners stay ahead.
For 2025, the IRS adjusted both tax brackets and the standard deduction to account for inflation. The new standard deduction is:
These changes affect how much tax should be withheld from each paycheck. Without adjustments, some employees may end up underpaying or overpaying.
Underpaying taxes throughout the year can lead to:
By checking midyear, small businesses and employees have time to make gradual adjustments—rather than rushing to catch up in the last quarter.
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The IRS provides a Tax Withholding Estimator tool that helps determine whether an employee’s current withholding is appropriate. It factors in:
Employees can then submit a revised Form W-4 if needed, ensuring more accurate withholding going forward.
A lot can happen in the first half of the year. Life changes that often affect tax withholding include:
Business owners may also need to adjust withholding for new hires, promotions, or compensation changes. A quick midyear review keeps payroll and taxes aligned.
The Social Security wage base increased to $176,100 in 2025. This means Social Security tax applies to a higher portion of employee wages, which impacts both employer and employee contributions. Payroll systems should be updated to reflect this.
Since its redesign in 2020, Form W-4 no longer uses allowances. Instead, it uses straightforward income and deduction-based steps. Many employees haven’t updated their W-4 since the redesign, which can result in withholding that no longer fits their situation.
Encouraging your team to review and update their W-4 midyear is a simple but effective way to stay compliant.
Professional accounting services can make this process smoother by:
For small businesses without dedicated HR or payroll teams, outsourcing to an accounting partner can prevent mistakes and free up time for other priorities.
If you’re running a US small business, a midyear review of tax withholding is essential. With IRS updates already affecting 2025 paychecks, this is your chance to make sure everything still lines up. It’s also a great time to help your employees avoid unpleasant surprises at tax time.
Whether you’re handling payroll yourself or working with accounting services, now is the right time to revisit withholding, make adjustments, and stay on track.
Running payroll shouldn’t keep you up at night. Our in-house payroll team handles all the complexities—from withholding calculations to tax deposits. We ensure compliance, manage deadlines, and keep your books updated automatically.
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