Is It Time to Recalculate Your Withholding?

Reprint From 4/29/2014: Handy Tool: IRS Withholding Calculator

Last year (2014), Tri-Town Apple published two articles about adjusting your federal withholding tax amount. Since we are into this year’s “tax season”, we thought it might be a good idea to reprint that information to help anyone who feels they need to have more, or less, money withheld from their paycheck.

Since many of our members live and work in Connecticut, we included a link to the CT W-4 Form. We also included a link to a CT publication which explains the withholding requirements for tax year 2014, contains tables for computing withholding amounts, and the necessary forms. Since it doesn’t appear that Connecticut has published an updated version, we’ll leave the link to the 2014 version in place.

Connecticut Income Tax Withholding Requirements for Connecticut Employees
Effective January 1, 2014, through December 31, 2014.

 

Yes, it’s that time of year again, Tax SeasonToday we’re turning our attention to an important factor in almost anyone’s yearly tax experience, namely the amount of money already paid to the government, either withholding or estimated payments, compared to the amount of tax owed. In particular, today’s post is about withholding, but the thoughts apply to estimated taxes as well.

Did You Withhold Enough or Too Much
If you’ve been under withheld sometime in the past, you probably know that there can be penalties and interest charged when this is the case. On a straight dollars and cents view, this is something you would like to avoid.

At the same time, you don’t want to give the government substantially more money than necessary during the year. Yes, the excess will be returned as a refund, but you lost the earning power of those funds for a period of time.

What Would You Like To Do
So, what most taxpayers would like to do is come out about even when they figure out their yearly taxes. That is, during the year, they had withheld just about the same amount as they owe in taxes. Some people prefer to have a bit of withholding cushion, i.e. they over  withhold slightly to assure they do not have to write a check to the IRS on April 15 and they will have a small refund coming. Others prefer to under withhold slightly, not enough to cause a penalty. They, of course, make up the difference with a check to the IRS. It’s a matter of personal preferences.

OK, that introduction is essentially Tax Paying 101. Most people are familiar with that. What they may not have is an easy way to calculate how much withholding they should have taken out of their earnings and how to change the amount withheld.

Here’s the Tool You Need
If that describes you, then here’s what you are looking for, the IRS Withholding Calculator. It will help you determine what you need to have withheld to achieve the level you are looking for, (i.e. to hit the tax amount right on, have a little over withheld, or perhaps under withhold slightly). It’s your call.

Online W-4
There’s even a W-4 Form download available (that’s the form you give to your employer to set the withholding amount). You can fill in the blanks on the W-4 Form online and print a copy to submit to your employer. You can also save a copy on your computer, so you will always have a record of what your current W-4 withholding is. Not bad.

Visit Our Tools Page
We’ll bring this up again, right after the tax deadline, to help those who, after doing their 2013 taxes, decide they need to change their withholding. But if you want to take a look at your withholding some time between now and late April, just remember this. The Tri-Town Apple has a Tools Page and the link to the IRS Withholding Calculator is there.

Not only is the Withholding Calculator there, but there are many more useful calculators, checklists, guides, and other tools. Check it out!

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