Estimate Your Federal Tax Withholding To Avoid Large Tax Bill Later
Employers are required to withhold some of our money from our paycheck and send it to the IRS. This is actually a prepayment of tax we will owe at the end of the year.
You want to make sure your employer is withholding enough or else you will have to pay when the tax season rolls around.
How do I know if my Employer is Withholding Enough?
That is a good question and everybody should be asking about this. A simple search online will lead you to all sorts of federal tax withholding calculators. Be careful though, you would be better off using the new w-4 calculator from a trusted source like TurboTax, to get a good estimate of taxes you should have withheld.
Keeping Tax Information Together
If you keep all of your tax information together in one place, you will have a more accurate estimate of your federal withholding rate. Your personal profile will have the necessary information about your filing status and dependents. All of the information combined will determine if enough money is being withheld from your paycheck.
Key Considerations for Withholding
1. Are you an employee with two concurrent jobs?
2. Do you and your spouse both work?
3. Can you be claimed on someone else’s tax return as a dependent?
Do you see what I mean? The more money you make, more withholding has to occur so you don’t end up with a huge amount when you file your federal income tax return.
Do you Want More Money now or a Bigger Refund?
If you would like your weekly check to be bigger, then you can have your withholding reduced so, your check has more money now for everyday living. If you want a bigger refund at the end of tax season, then you can ask your employer to withhold more money now so, the tax refund will be bigger but, your weekly check will be somewhat smaller now.
Just the Tip of the Iceberg
If you would like more information about withholding you should visit TurboTax Online for complete information concerning federal tax withholding estimates. Perhaps you receive a pension or unemployment income.
What about self-employment tax or what if my job ends before the year is over? This is where withholding gets a little more complicated and when we call in the Tax Experts. Don’t risk landing yourself in a big mess. Try TurboTax for free today along with millions of other Americans!