The Internal Revenue Service mandates employers to withhold tax from their employees’ salary so they can pay for their federal income tax. Before the employer begins withholding tax though, the employee should fill out Form W-4, Employee’s Withholding Certification. This will provide enough information to the employer so the taxes withheld from the employee’s income isn’t too little or too much.
If the taxes withheld from the employee’s pay is too much, it will significantly lower the amount he or she gets after tax. If the taxes withheld is too less, the employee will have to pay the IRS when filing a tax return. Because of this, employees should provide the most correct information on Form W-4 so the employer can withhold tax at the right rate.
Employers need to use federal tax withholding along with the employee’s Form W-4, pay frequency, and salary to calculate tax withholding.
Learn more about 2020 tax withholding tables here.
Estimate Taxes on IRS.gov
Use the IRS tax withholding estimator to estimate how much tax will be withheld from their income during the course of the tax year. This tool allows you to speculate whether or not you will owe the IRS or get a tax refund.
The tax withholding estimator is very accurate as long as you provide the correct information. On the IRS tax withholding estimator, you will need to enter information about the following.
- Personal information such as filing status
- Income and withholding
- Adjustments to income
- Anticipated tax deductions
- Anticipated ax credits
Based on these points, you will see how much you are likely to withhold by the end of the tax year. If the amount you see satisfies you, no need to do anything. If not, you can file a new Form W-4 and furnish it to your employer. Once a new Form W-4, Employee’s Withholding Certificate is submitted, tax withholding based on that will start in the next paycheck. Learn more about how to file Form W-4 and how it works.