The IRS Tax Withholding Estimator is an online tool that helps taxpayers determine how much federal income tax should be withheld from their paychecks to avoid owing taxes or receiving a large refund. The tool considers factors such as:
- Income level.
- Filing status.
- Tax deductions and credits.
Taxpayers can use the estimator to adjust their Form W-4, ensuring that the correct amount of tax is withheld throughout the year. This helps taxpayers avoid underpayment penalties or large tax bills when filing their annual return.
The Tax Withholding Estimator is particularly useful for individuals with changing income, multiple jobs, or complex tax situations. By using this tool, taxpayers can ensure that their withholding matches their tax liability, avoiding surprises at tax time.