Paycheck withholding ensures that you have the right amount withheld from your paycheck so that you don’t have a surprise at tax time. The new Form W-4 may be confusing; irs.gov provides tools to help. Search for “Withholding Estimator.” You can answer questions about your income to help you figure out your withholding. Alternatively, call Tax & Accounting Solutions and we can work through the forms together.
Generally speaking, you should increase your withholding if you hold more than one job at a time or you and your spouse both have jobs or you have income from sources other than jobs or self-employment that is not subject to withholding. If you do not make adjustments to your withholding for these situations, you will very likely owe additional tax when filing your tax return, and you may owe penalties. For income from sources other than jobs, you can pay estimated tax instead of having extra withholding.
You should decrease your withholding if you are eligible for income tax credits such as the child tax credit or credit for other dependents, and/or you are eligible for deductions other than the basic standard deduction, such as itemized deductions, the deduction for IRA contributions, or the deduction for student loan interest.
You can read the FAQs here. Tax & Accounting Solutions can answer your questions in the context of your individual income and tax circumstances.
The table below provides tax rates related to 2020 tax brackets. (MFJ= Married filing Jointly; MFS= Married filing Single; HOH= Head of Household)
|2020 Federal Income Tax Brackets|
|10%||$0 to $9,875||$0 to $19,750||$0 to $9,875||$0 to $14,100|
|12%||$9,876 to $40,125||$19,751 to $80,250||$9,876 to $40,125||$14,101 to $53,700|
|22%||$40,126 to $85,525||$80,251 to $171,050||$40,126 to $85,525||$53,701 to $85,500|
|24%||$85,526 to $163,300||$171,051 to $326,600||$85,526 to $163,300||$85,501 to $163,300|
|32%||$163,301 to $207,350||$326,601 to $414,700||$163,301 to $207,350||$163,301 to $207,350|
|35%||$207,351 to $518,400||$414,701 to $622,050||$207,351 to $311,025||$207,351 to $518,400|
|37%||$518,401 or more||$622,051 or more||$311,026 or more||$518,401 or more|