Posted by : Daniel Stoica in (Blog, Tax Tips, Tax Withholding) On: July 23rd, 2011
If you don’t withhold enough in taxes each pay day, you may end up owing more money than you had planned come tax time. If you withhold too much, you may end up getting a large refund, but you, ultimately, give up more money each payday.
You have the option of working with your employer to adjust your withholdings each pay period. You can also figure your withholding if you have gotten married or divorced during the year, added a dependent, bought a house, changed jobs, or retired.
On the IRS website, there is a withholding calculator that will help you figure how much should be taken out of your pay each pay period. It will figure out the accurate amount of federal withholdings and gives you information to help you fill out your W-4, the Employee’s Withholding Allowance Certificate. To find the calculator, go to the IRS.gov website and search for “withholiding calculator”.
In order to use the withholding calculator, have the following items handy.
-Your most recent pay stubs.
-Your most recent federal income tax return.
More tips for using the withholding calculator:
-Fill in any information that applies to you.
-Make an estimate, if necessary. The results are only as accurate as the information you give.
-Check any links in the program if you have questions.
-Print the last screen. It gives you a summary of everything you entered with your calculations. You can use this to fill out a new W-4 if you need to, then give it to your employer.
-Keep the form you printed and a copy of your W-4 for your tax records.
The withholding calculator is a helpful resource for most people because it makes the process of figuring out your withholding so much easier.
If you are self-employed or are required to have an alternative minimum tax, or if your job is ending before the end of the year, you will get a more accurate figure by taking a look at Publication 919, How Do I Adjust My Tax Withholding. The publication can be found at www.irs.gov or by calling 1-800-829-3676.
If you have additional questions about tax withholding, contact a tax professional.