How to Calculate Your Tax Withholdings for 2014
We all can admit that it feels good to find out that you are going to receive a decent sized tax refund. However, you should not be looking at your tax refund as a gift that has been provided to you from the government.
Instead it is your hard earned money that the government is sending back to you. A better way to look at it is that you gave the government a loan that was interest free since the Treasury Department is not paying any interest on the money that you loaned them throughout the year.
Usually, the amount of your tax withholdings are going to equal your tax liability amount. This means that you will not be in debt to the IRS but you will also not receive a refund either. You may get a small refund but nothing to brag about. The downside is if you do not pay enough on your taxes throughout the year you will be penalized with interest.
How Employees Can Calculate Their Tax Withholdings
Employee’s tax withholdings depend solely on how the IRS Form W-4 was filled out. This form has to be filled out every time you start a new job. It is not sent to the IRS, instead your employers keeps it on file so they can determine how much of your money they need to withhold.
Additionally, you will also use the same form to claim your withholdings. The number of allowances that you are eligible to claim is the main factor in determining your withholding amount. You will find allowances for yourself, your spouse, and any dependents that you have. If you need to change your withholdings at any time you will have to complete a new Form W-4.
The Form w-4 helps you determine your withholding amount with the helpful worksheet that it included. However, if you go to the internet you may find that doing so electronically is easier and faster.
Reasons to Submit a New Form W-4
If a major change occurs in your life you are going to want to report it as it does affect your withholding amount. Some of the most common life changes include, but are not limited to, marriage/divorce, additional jobs, changing jobs, unemployment, home owner, additional itemized deductions, new tax credits, or a new child joins your family.
For example, if you are pregnant and the child is going to be born this tax year you are going to want to add an additional dependent. This will bring down the amount of money that your employer withholds from you. Furthermore, if you need to take away some of your allowances you will need to submit a new form to your employer within 10 days after the change are made. For example, if you were to change your status from married to single.
Remember, when you use TurboTax to prepare your taxes, we’ll ask you simple questions about your situation and recommend the filing status, credits and deductions that will get you the biggest refund. You can also use the free tax estimator to see your tax refund amount in advance.
We all can admit that it feels good to find out that you are going to receive a decent sized tax refund. However, you should not be looking at your tax refund as a gift that has been provided to you from the government.
Instead it is your hard earned money that the government is sending back to you. A better way to look at it is that you gave the government a loan that was interest free since the Treasury Department is not paying any interest on the money that you loaned them throughout the year.
Usually, the amount of your tax withholdings are going to equal your tax liability amount. This means that you will not be in debt to the IRS but you will also not receive a refund either. You may get a small refund but nothing to brag about. The downside is if you do not pay enough on your taxes throughout the year you will be penalized with interest.
How Employees Can Calculate Their Tax Withholdings
Employee’s tax withholdings depend solely on how the IRS Form W-4 was filled out. This form has to be filled out every time you start a new job. It is not sent to the IRS, instead your employers keeps it on file so they can determine how much of your money they need to withhold.
Additionally, you will also use the same form to claim your withholdings. The number of allowances that you are eligible to claim is the main factor in determining your withholding amount. You will find allowances for yourself, your spouse, and any dependents that you have. If you need to change your withholdings at any time you will have to complete a new Form W-4.
The Form w-4 helps you determine your withholding amount with the helpful worksheet that it included. However, if you go to the internet you may find that doing so electronically is easier and faster.
Reasons to Submit a New Form W-4
If a major change occurs in your life you are going to want to report it as it does affect your withholding amount. Some of the most common life changes include, but are not limited to, marriage/divorce, additional jobs, changing jobs, unemployment, home owner, additional itemized deductions, new tax credits, or a new child joins your family.
For example, if you are pregnant and the child is going to be born this tax year you are going to want to add an additional dependent. This will bring down the amount of money that your employer withholds from you. Furthermore, if you need to take away some of your allowances you will need to submit a new form to your employer within 10 days after the change are made. For example, if you were to change your status from married to single.
Remember, when you use TurboTax to prepare your taxes, we’ll ask you simple questions about your situation and recommend the filing status, credits and deductions that will get you the biggest refund. You can also use the free tax estimator to see your tax refund amount in advance.