Taxes Tips for The Average Joe
It can be frustrating to calculate federal tax withholdings. This is because it is a complex process to figure the IRS tax code. This is a problem that keeps growing because the number of people who are underpaying taxes is increasing. Read on to know what you need to put in mind when calculating federal tax withholdings.
The first thing you need to do is use the IRS withholding calculator. This will help you in identifying the amount that is being withheld. You have to obtain a new W-4 form regardless. Find out your current withholding from the last 1099 or W-2 form. Next you need to identify your gross income for the entire years. It is advisable to know your filing status. This is because it will help in determining the federal tax withholding rate. The status can be either married, single, qualifying widow or head of household.
Also, know your allowances. This is because it will help you when filling the W-4 form. It assists in determining the amount that is withheld from your paycheck. The more allowances you have, the less the amount that is withheld. Zero allowance is an indication that the amount that is withheld is more or you will get a larger refund. The next step would be to claim your deductions. This is if you get deductions that are $6,300 or more. You should deduct expenses like healthcare costs, retirement payments, and donations. It is vital you check with IRS. The IRS has circular E that indicates what amount is necessary to withheld from paycheck.
It is important you calculate the percentages. You will get this information on IRS publication page 43. It will assist you to calculate your withholding percentage. You just have to know your allowances and then multiply it by the figure that is listed in table 5. You will determine this by how often you get paid. Then minus the amount from your pay. Afterwards, use the tables provided on pages 45 and 46 to know your filing status and the frequency in which you get paid. This will assist you to knowing the income tax withheld.
After completing your federal tax withholdings, you have to know your payroll withholdings. Calculate the social security tax. It is not a complicated process. You need to multiply your gross pay by 6.2%. However, for Medicare tax, you multiply the gross pay by 1.45%. It is advisable to check for additional Medicare taxes.If you earn a certain amount, you have to make an additional Medicare taxes. Single earners who get more than $125,000 yearly or are married and get more $250,000, you need to pay 0.9% in Medicare taxes.