Federal Income Tax Withholding Estimator

[SargeW]

With tax season coming up and the changes to the "standard deduction", many peoples tax situations have changed.  I found a "Tax Withholding Estimator" on the IRS web site that was simple and easy to use.  Just by plugging in a few simple numbers off of your most recent paystub, and the caculator will let you know if your current withholding amount is sufficient for the end of the year. 

I did it in a few minutes and found that I was just barely short of an even wash at the end of the year. There is still a few months to make an adjustment if you need to.  No personal info is required, just numbers and you can run it as many times as you want. Just wanted to pass it along.

https://apps.irs.gov/app/tax-withholding-estimator/about-you

 

 

[Prior member]

And make sure if you get a letter from the state or Feds saying that you owe money and you know you don't to challenge it.
We have all our lives done our taxes as honest as we could yet last month we received a notice from the state that we owed four hundred dollars.
My wife (who does the taxes) went completely over them again and still came out that we did not owe it, so she called up the state and talked to a women. My wife explained all of our figures and then the lady asked her if she could hold on for fifteen minutes while she went into our file.  She came back and said that my wife was absolutely correct, that some how the second page of our return never got scanned into the computer system. She corrected everything and said to just disregard the notice.

We were wondering how many people get notices like that and then just go ahead and pay without questioning it.

Jack L

 

[breezie]

I received a notice one year saying I owed $1300.00.

Like you, I went over my return and noticed THEY had made a mistake with a decimal point.

And like you, when I pointed that out they said something to the effect of "oh, ok, never mind then."

I bet it happens a lot.

 

[lynnmor]

I've been self-employed for many years.  My income can vary from next to nothing one year and the next can be very good.  Unlike the IRS where I can pay based on last year, PA requires me to pay quarterly the exact amount needed for income taxes when I have no clue what the end result will be.  I have paid penalties a number of times due to a faulty crystal ball.  Yes, I have taken it up with my representative, but he could not understand the problem. 

 

[garyb1st]

Unless I missed it,, there's no box for the RMD from my IRA. 

 

[UTTransplant]

Gary, isn't RMD handled as regular income?

As for tax calculators, we have used the IRS one for federal taxes. We have more trouble with state taxes though. We have income producing assets in two states. We also have income from where we live (a third state). Ugh! Part of the out of state income is farm income, and you don?t know what this is going to be until the crop is sold. We generally try to do a solid look in October and (gu)estimate what the end of the year will be. Last year we ended up paying one state and getting a small refund from another state. Our domicile state was a wash. Wish the states had better estimators.

 

[SargeW]

I have had way more issues with state taxes than I ever had with the fed. I got notices from the state of Ca when I lived there, 5 years in a row for the same mistake (theirs).  Each year I would send the same documentation, and each year I would get the same response to disregard the first letter.  Their system doesn't work very well.

 

[Arch Hoagland]

I have had way more issues with state taxes than I ever had with the fed. I got notices from the state of Ca when I lived there, 5 years in a row for the same mistake (theirs).  Each year I would send the same documentation, and each year I would get the same response to disregard the first letter.  Their system doesn't work very well.

Well at least they were consistent.....

 

[garyb1st]

Good point Pam.  I'll do it again and plug that in.  Usually I determine how much additional tax I will owe by doing a pro-forma and then have the pension guys deduct that amount with the RMD to avoid an underpayment penalty.  That way the money's in my account rather than theirs.

 

[BernieD]

The IRS and many states have some safe harbor exemptions for underwithholding/estimated payments. Generally, if your balance due on the return is under $1,000, there will be no penalties or interest assessed. Also, depending on your income, if you have paid in via withholding or estimated payments 80-90% of last year's tax you won't be assessed penalties or interest unless there is a significant taxable event occurring; taxable sale of home, large capital gain, large taxable pension distribution, etc. There is no need to give the IRS a free loan by overwithholding or estimated payments in excess of the minimum.


And then there is a high income client of mine who historically withheld so much that they received about a $25,000 refund every year and refused to reduce the withholding. The refund check was their trip to Europe every year :

 

[Oldgator73]

After I sent in this years taxes (Turbo Tax) my wife asked if we could claim our son who has a 100% unemployable disability rating from the VA. He lives with us full time. I did a corrected return for both federal and state and received an additional couple hundred back from the state and $550 from federal.

 

[TheBar]

Remember to keep your tax returns. My wife was married to someone else in 1988 and he supposedly made a $500 mistake on their return, although he didn't keep their return for 8 years so we'll never know. They were divorced in 1989. We were married in 1993 and built a new house on an acreage in 1993. In 1996 I came home to find a notice of eviction taped to our front door. The IRS ordered us to pay $500 to the county sheriff or we would be evicted by 5 pm the following day. I called the IRS and told them my wife and I had never received any kind of notice. We had filed jointly for 3 years and never had anything withheld from our tax refunds. She said we could appeal but nothing would stop our 24 hour eviction even though our state has a 30 day minimum eviction law.

Needless to say I immediately went to the sheriff and paid the $500. He said the IRS evictions were one of the hardest things he had to do and a lot of people lose their house because they cannot come up with whatever the IRS says they owe.

 

[SeilerBird]

The IRS and many states have some safe harbor exemptions for underwithholding/estimated payments. Generally, if your balance due on the return is under $1,000, there will be no penalties or interest assessed. Also, depending on your income, if you have paid in via withholding or estimated payments 80-90% of last year's tax you won't be assessed penalties or interest unless there is a significant taxable event occurring; taxable sale of home, large capital gain, large taxable pension distribution, etc. There is no need to give the IRS a free loan by overwithholding or estimated payments in excess of the minimum.


And then there is a high income client of mine who historically withheld so much that they received about a $25,000 refund every year and refused to reduce the withholding. The refund check was their trip to Europe every year :

I do the same thing but not so radically. I overpay $300 per month which gives me a wonderful refund check in February. ;D

 

[Prior member]

Unless I mis

There is a box for it on 1040, page 2 "4a" - IRA's, pensions and annuities

Jack L

 

[UTTransplant]

I do the same thing but not so radically. I overpay $300 per month which gives me a wonderful refund check in February. ;D

This works if you can?t trust yourself to save it on your own. Personally I prefer to earn interest on my money rather than giving an interest free loan to the US Government. My goal in life is to owe the government 3-5% of my tax bill. Not too much that I get extra scrutiny or penalties, but I pay that much on April 14 and bank the money myself.

 

[Dragginourbedaround]

I agree with SeilerBird. Depending on the bank, the interest on $300 a month for 12 months is only about $40. And I don?t mind giving the government a loan, god knows they need it more than the banks do! 

 

[garyb1st]

And then there is a high income client of mine who historically withheld so much that they received about a $25,000 refund every year and refused to reduce the withholding. The refund check was their trip to Europe every year :

Your client needs more than a good accountant.   

 

[BernieD]

Your client needs more than a good accountant.   

He's got one, that's why he keeps getting $25,000 refunds. Some people just compartmentalize differently :

 

[SeilerBird]

This works if you can?t trust yourself to save it on your own. Personally I prefer to earn interest on my money rather than giving an interest free loan to the US Government. My goal in life is to owe the government 3-5% of my tax bill. Not too much that I get extra scrutiny or penalties, but I pay that much on April 14 and bank the money myself.

You cannot afford to save $300 a month. If I ever get to the point where $30 a year is a problem then just shoot me. I love the US and all the benefits of living here, like police, armed services, parks, beaches, schools, etc. I don't mind giving a bit to them, they have sure helped me.

 

[lynnmor]

I don't mind giving a bit to them, they have sure helped me.

I think that there is a clue in here concerning run-away taxation.