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Did you owe the IRS or get a larger refund than you expected? If so, it may be a good idea to do a withholdings checkup. The IRS offers taxpayers the use of a Withholding Calculator on their website. It is a good idea to ensure that you are withholding the right amount of income tax from your paychecks. No one wants to loan money to or owe the IRS, so take time to do so now.
The Withholding Calculator is too to help you keep from having too little or too much withheld. When you have too little tax withheld you are likely to see an unexpected tax bill which could carry a potential a penalty in the following tax year. The average refund is just over $2,800. If you would prefer to take home more each paycheck instead of getting a lump sum at the end then you need to adjust your withholdings.
Here are some tips for using the Withholding Calculator. You should:
- Fill in all information that applies to your particular situations.
- Make estimates when necessary, but keep in mind the results are only as accurate as the information entered.
- Use your most recent pay stubs and tax return to help estimate income. Keep in mind the new tax law made significant changes to itemized deductions.
- Check the information links embedded in the program whenever you have questions.
- Print the final screen that summarizes their entries and the results. Use the results to determine if you should complete a new Form W-4, Employee’s Withholding Allowance Certificate.
Remember, the Withholding Calculator does not ask for personal information, such as name, social security number, address, or bank account numbers. Also, the IRS does not save or record the information you enter.
If you have more questions, contact your financial advisor or CPA. We are happy to help.