How Much Should You Withhold In Your Paycheck For Taxes?
MINNEAPOLIS (WCCO) -- Ever wondered if you'll get a refund or owe Uncle Sam at tax time? The I-R-S wants workers to stop guessing. This week, it's encouraging people to visit its website to calculate how much they should give to federal government each week.
So, how much should we withhold in our paychecks? Good Question.
"Because of the tax law changes, because of tax reform in 2018, they want all taxpayers to say 'Is my election to have X, Y, Z tax withheld, appropriate?'" says Adam Goehring, a partner with BerganKDV, an accounting firm in Bloomington.
Goehring expects many taxpayers to be in for a surprise next year if they don't evaluate how much they are withholding. Experts recommend examining the allowances on a W-4 after any major life event, like a job change, bonus, extra income, marriage, divorce or birth of a child.
Everyone's tax returns are different, so it's hard to generalize about how much workers should withhold. In addition, some workers also prefer a tax refund each April, while others don't mind paying in April if it means more money in their paychecks during the year.
"I would recommend and would love to have zero tax or zero refund, but, in reality, that's a difficult proposition," Goehring says.
That's where the IRS Paycheck Checkup comes in. There is a withholding calculator on the IRS website that people can use to determine their estimates federal taxes and figure out how much to set aside each pay check. It's a 4-page questionnaire that asks about things like marital status, children, tax deductible investments, current allowances, day care costs, tax credit and income. All of the information can be found on last year's tax return and a most recent paystub.
After entering all of the information on the withholding calculator, the website will share how much in federal taxes someone is expected to pay, how much will be withheld, how many allowances and what claims they should make as well as how much money they should withhold each pay period. That worker can then print out a W-4, fill it out and hand it in to their employer.
As for state taxes, Goehring says Minnesota still has to figure out how it will handle its state taxes given the changes to the federal code.