How can I calculate my withholding tax rate?

how do i calculate tax withholding

Your withholding tax rate is estimated by your employer, who relies on the information on your Form W-4. How you fill out your W-4 ultimately determines how much of your income is withheld from your paychecks. You may be able to estimate your rate by using the IRS Withholding Calculator on IRS.gov.

Brief Overview of Tax Withholding

If you're like most American employees, there's a certain percentage of your income that you're never going to be able to spend. This is because the federal government requires that your employer withholds part of your income for taxes.

This money is deducted from your paycheck before you receive it. The money is then sent to the IRS by your employer. If too much of your money has been withheld, you may end up seeing a refund during tax

season.

Calculating and Filling Out Form W-4

Review your withholding every year and decide if you need to change your Form W-4. You should have as little money withheld as possible.

Before filling out or changing the W-4, use the IRS Withholding Calculator to estimate your correct rate. You need to use your most recent pay stubs and your last income tax return. The calculator asks you to estimate a few figures along the way. If you need to make a change, complete a new Form W-4 and turn it in to your employer's finance department.

Factors that influence your withholding rate include the amount of income you earn, the validity of the information on your W-4, any dependents, spouses or other withholding allowances you may have, and whether you want additional funds withheld.

Source: www.investopedia.com

Category: Taxes

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