The Internal Revenue Service issued an updated Tax Withholding Estimator that allows employees to determine the appropriate amount of federal income to be withheld from pay. It is important for employees to select the desired amount of federal income tax to be withheld throughout the year so they are prepared to pay or receive a refund at tax-time.
The Tax Withholding Estimator is an interactive program that calculates withholding based on various data-input items. Before completing the Estimator, employees should be sure to have the following information: the most recent pay stub for the employee and spouse; information about other sources of income; and the most recent tax return.
Changes from the newly-designed Form W-4 (Employee’s Withholding Certificate) are incorporated into the Estimator, and the results include information with recommendations on how to complete Form W-4. Users can use he Estimator to either seek refunds at the end of the year or have more money in their pay throughout the year without a refund. The tool also allows projection of a bonus to take into account withholding from future amounts. The IRS says it is important to review withholding, especially for individuals with more than one job.