Estimate Tax Withholding 2020

The United States uses a pay as you go tax system for both individuals and businesses. Instead of paying your owed taxes once, you pay gradually throughout the year. That’s why your employer requires you to complete a W-4 Form, Employee’s Withholding Allowance Certificate.

How much taxes withheld from your paychecks highly depends on the allowances you claim on the W-4 Form. If you’re single and claimed zero allowances, more taxes will be withheld from your paycheck compared to someone who claimed multiple allowances. Although you can claim as many allowances as you want, if you underpay at the end of the year, you will have to pay to the IRS.

The possible scenario is that you will exceed the amount of money you owe to the IRS, this also known as tax liability and receive a refund by-product of that.

How to estimate my tax withholdings?

Employers are required to file a W-2, Wage and Tax Statement Form at the end of each year. If you get yours before the tax season starts, (employers have till January 31st to file) you will know the exact amount of taxes withheld from your pay. From there, you can simply subtract the amount of taxes withhold from what you owe to the IRS.

Assuming you don’t have your W-2, get your paychecks and look at how much taxes were withheld from your paycheck on average then multiply the number of paychecks you received. Or you can simply add up all the taxes withheld from each paycheck.

What you get will be the money you’ve paid to the IRS throughout the year and if it doesn’t exceed how much you owe to the IRS, you will have to pay.

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