Payroll Withholding CalculatorIf you get large tax refunds every year, then you might be withholding (deducting) too much from your pay-check each week. Withholding too much is not desirable for several reasons. First, you are giving your government a free loan at your personal expense. You need not wait until next year's tax refund to get your money. Instead, you could use your money now, during this year, as soon as you earn it. You can collect interest on it, or invest it. Secondly, receiving a large refund increases your chances of getting audited. It makes it appear that you might have calculated something wrong on your return.
However, it is also undesirable to under-deduct by too much. It can result in penalty and interest charges. That can also increase your chances of getting audited.
So it is best to withhold the minimum amount you can, but without risking penalties.
There is much confusion surrounding payroll deduction calculations. You can fill out W4 forms, but there are many special cases that do not apply to most people. Turns out, if you collect a regular pay-check throughout the year, there is a simple calculation that gives you a good deduction amount without risking any penalties. For convenience, we provide this calculation in a simple program you can download here:
If you are self-employed, or some other situation, you need to make estimated payments on a quarterly basis, so the above program may not apply to you. However, for the rest, taxes are withheld in each weekly or bi-weekly paycheck. You can adjust the withholding amount through your employer. Usually the amount starts out at a default value, which may be too high or too low for your situation.
Your paycheck should also list the total accumulated amount so far withheld during the year.
About midway through the year, it is a good idea to check how much you will have withheld by year-end, versus how much you should need. And then adjust it while you still have time to make up the difference.
This program helps you calculate how much Federal or State taxes to have deducted from your weekly paycheck. The Fed and State deductions are separate. They are based on separate amounts. So you may need to run this calculator twice: once for Federal, and once for State taxes if you live in a state that taxes income.
The program attempts to calculate an appropriate deduction amount that minimizes over-payment, while providing a safe margin to avoid under-paying. The images below show a typical usage. Question-mark buttons to the right of each prompt, provide help dialogs.
There are three primary input values, and one optional input:
Once you enter the required values, press the Calculate button. A pop-up window will then show your recommended weekly deduction amount, and any recommended adjustments.
There is often a slight uncertainty on which pay-check will be the last one to be included in this year's earnings and withholdings, due to the way the calendar falls, and the way your employer chooses to to issue paychecks. So the calculation could end up being off by one-week, plus or minus. Therefore, to be safe, this program attempts to calculate conservatively. The recommended deduction amount should cause your total end-of-year withholding total to be very close to the minimum safe amount, without going under, but may be over (only) by as much as one week's deductions.
For more information about the calculation, see: Weekly Payroll Deduction Calculation
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