We’ve all been there before: We got a new job, and on the first day, our new boss puts a Form W-4 on our desk and tells us to fill it out for withholding.
It takes a bit of math and what feels like a good helping of guesswork to figure out just how much tax we need to withhold from a paycheck. Too little, and we could owe a hefty sum when we file; too much, and the IRS hangs onto it until we get a tax refund. Luckily, the Internal Revenue Service has an online tool that can help taxpayers determine how much they need to withhold.
The Tax Withholding Estimator on IRS.gov does just what it says: help taxpayers determine whether their employer is withholding enough tax or if they need to fill out a new Form W-4. The tool is available for regular employees, but also for retirees, self-employed taxpayers and others—virtually anyone who gets a regular paycheck.
With just three easy steps, the clouds of uncertainty can begin to clear.
Step One: Gather Documents
This first step should be completed before taxpayers bring up the Estimator. Users will need a copy of their most-recent pay stub and tax return. Once those items are in hand, the user can go online and use the Tax Withholding Estimator on IRS.gov.
Users should read all the information and directions presented there. To move on, click the blue Tax Withholding Estimator button.
Step Two: Answer Questions
Once they’re done with the opening information, users get down to giving the tool with the information needed to come up with the correct withholding amount. This is done by merely answering the questions posed on-screen about the user’s tax situation.
As the user completes a section, clicking the blue Next button sends them to the next step.
Step Three: Review Results
The Estimator helps users aim for a tax-due amount that’s close to zero—or a refund.
Depending on the information given by the user, the tool may deliver a recommendation to submit a new Form W-4, Employee’s Withholding Allowance Certificate. The W-4 goes to the employer, not the IRS, and is used to change the amount withheld each pay period.
Many times, employers use an online method for making changes in withholding, so workers should check with their employers before filling out a paper form.
Taxpayers who get a pension can use their results to fill in a Form W-4P, which goes to the payer.
Source: What taxpayers need know about using the IRS Tax Withholding Estimator.
Trussell Tax