When my son reached an age where day care was no longer required, I no longer had that BIG $4,000-$6,000 “BONUS” at tax time. What I came to realize is that it really wasn’t a bonus. Instead, it was money I could have in my pocket bit by bit throughout the year, instead of one lump sum. I found myself using my tax returns to pay off debt that I had accrued but fell behind on or buying things that I NEEDED like contacts/eyeglasses throughout the year, but had to wait due to financial stress. This was many years ago.
How do you keep it in your pocket?
The IRS’s website offers a Withholding Calculator that tells you how many exemptions to claim on your federal taxes based on specific (or estimated) income and deductions.
For example, as a single parent, filing head of household, I thought that I could claim no more than 2 (me & my son). What I came to find out is that with my income, child tax credit, standard deduction and itemized deductions (if any) that I could claim 6 when I first found this valuable tool. I reevaluate every 6 months just to ensure I never owe at tax time, but always get a small chunk of change bank. This year, I got a little over $600 back from federal and state combined, but I was able to keep the rest in my pocket through out the year.
Please note that results may vary greatly based on individual/family income, bonuses, deductions and other income. Please refer to the IRS for further details. If you have not been receiving a refund and have owed at the time of tax filing, this is a great tool to ensure you have the proper amounts withheld throughout the year so you’re not stuck paying one lump sum (potentially with interest if you must make payments).
Tips For Using This Program
- Have your most recent pay stubs handy.
- Have your most recent income tax return handy.
- Estimate values if necessary, remembering that the results can only be as accurate as the input you provide.
To Change Your Withholding:
- Use your results from this calculator to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate.
- Submit the completed Form to your employer.