2011, 2012 Federal Tax Withholding Calculator

A Federal withholding tax is taken out of a salary, wage income, tips earned, pensions, retirement distributions and certain gambling winnings.

Employees: Income tax amount withheld on wages is based on the amount of wages less an amount for declared withholding allowances (often called exemptions). Amounts of tax withheld are determined by the tax withholding tables. You can use the free W-4 calculator by TurboTax to determine how much tax you should have withheld from your paycheck.

The amount of federal tax withheld from your wages depends on your marital status and how many dependents you claim. You have to file Form W-4 with your employer. If you do not do this, they will assume you are a single person with no dependents.

Employers: If you are an employer you must withhold Federal and State taxes from your employees paychecks. To simplify the task of calculating withholding taxes, you can use the payroll tax calculator by Intuit. They offer a 30 day free trial.

Withholding Should Cover Your Estimated Tax

By filling out a W-4 tax form with your employer, you can adjust your withholding tax. The number of allowances you claim will either increase or decrease the amount of taxes being taken out of your check. On your W-4 you may also claim other allowances like the child tax credit and many others.

Is Your Federal Withholding Too Much or Too Little?

If you have to pay a large tax at the end of the year, you had too little withheld. If you are getting a large tax refund, you had too much withheld. If you are not expecting a tax refund, you may want to pay more each quarter to avoid paying so much at the end of the year.

The tax return calculator looks at your entire tax situation, including your other income and expenses, and figures out what you'll actually owe on your taxes for the year. It then determines how much you should have withheld to cover what you'll owe for the year, without giving Uncle Sam a big loan.