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.