Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe.
Wages and Income Tax Withholding
- New Job. Your employer will ask you to
complete a Form W-4, Employee's Withholding Allowance Certificate.
Complete it accurately to figure the amount of federal income tax to
withhold from your paychecks.
- Life Event. Change your Form W-4 when certain life events
take place. A change in marital status, birth of a child, getting or
losing a job, or purchasing a home, for example, can all change the
amount of taxes you owe. You can typically submit a new Form W–4
anytime.
- IRS Withholding Calculator. This handy online tool will help you figure the correct amount of tax to withhold based on your situation. If a change is necessary, the tool will help you complete a new Form W-4.
- Estimated tax. This is how you pay tax
on income that’s not subject to withholding. Examples include income
from self-employment, interest, dividends, alimony, rent and gains from
the sale of assets. You also may need to pay estimated tax if the amount
of income tax withheld from your wages, pension or other income is not
enough. If you expect to owe a thousand dollars or more in taxes and
meet other conditions, you may need to make estimated tax payments.
- Form 1040-ES. Use the worksheet in Form 1040-ES, Estimated
Tax for Individuals, to find out if you need to pay estimated taxes on a
quarterly basis.
- Change in Estimated Tax. After you make an estimated tax
payment, some life events or financial changes may affect your future
payments. Changes in your income, adjustments, deductions, credits or
exemptions may make it necessary for you to refigure your estimated tax.
- Additional Medicare Tax. A new Additional Medicare Tax went
into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax
applies to an individual’s wages, Railroad Retirement Tax Act
compensation and self-employment income that exceeds a threshold amount
based on the individual’s filing status. For additional information on
the Additional Medicare Tax, see our questions and answers.
- Net Investment Income Tax. A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. For additional information on the Net Investment Income Tax, see our questions and answers.
Additional IRS Resources:
- IRS Withholding Calculator tool
- Tax Withholding
- Form W-4, Employee's Withholding Allowance Certificate
- Form 1040-ES, Estimated Tax for Individuals
- Publication 505, Tax Withholding and Estimated Tax
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication
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