IRS Tax Withholding Estimator Could Help Prevent You From Owing Future Taxes
Written by
Josephine Nesbit
Edited by
Cory Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The IRS recommends that anyone finishing up their 2021 income tax return use the IRS Tax Withholding Estimator to make sure the right amount of tax is taken out in 2022. The online tool can be used by workers, self-employed individuals and retirees who have wage income.
Results from the Tax Withholding Estimator can be used by employees to determine if they should complete a new Form W-4 and submit it to their employer. Form W-4 tells the employer the correct amount of federal tax to withhold from an employee’s paycheck.
The IRS said that checking withholding can prevent an unexpected tax bill or penalty and determine whether to have less tax withheld up front or a bigger refund at tax time. The IRS also advised using this tool at least once each year, such as after you file your tax return or following major life events, such as marriage, divorce, home purchase or the birth or adoption of a child.
Before using this tool, make sure you have your most recent pay statements, information for other sources of income and your most recent tax return. If you’re married, make sure you have this information for your spouse, as well.
For those with more complex tax situations, follow the instructions in Publication 505, Tax Withholding and Estimated Tax. According to the IRS, this includes those who owe alternative minimum tax or certain other taxes and people with long-term capital gains or qualified dividends.
If you have a pension but no job, estimate your tax withholding with the new Form W-4P. If you have a nonresident alien status, use Notice 1392, Supplement Form W-4 Instructions for Nonresident Aliens.
