Tax Withholding Estimator FAQs

Results Page

We recommend you check your inputs for federal income tax withheld on Step 2. Common mistakes made on this page that can greatly impact the amounts reflected in results include:

  • Ensure you are using round numbers and not attempting to input decimals.
  • Double-check to make sure the “Year to date” field includes the total federal income tax withheld and the “From last check” includes only what was withheld for that pay period.
  • Ensure you are referencing your most recent 2020 paystub and not one from a previous year. 

For jobs/pensions that you currently hold: The expected tax withholding is projected by multiplying the anticipated number of remaining pay periods you have for the year with the amount withheld per pay period and adding it to the withholding to date. The tool adds any estimated tax payments made or any other taxes paid for other sources of income in the expected tax withholding calculation to determine the total amount expected to be paid for the year.

For jobs/pensions that have not started yet: The application uses the standard withholding amount based on your filing status and estimated income. You can request deviations from the standard withholding on a Form W-4, and the tool will instruct you how to make those adjustments.

The Tax Withholding Estimator uses your filing status, income, adjustments, deductions, and credits to estimate your anticipated tax obligation. Your actual tax obligation may differ from this if the amounts you entered are incorrect or if your situation involves tax requirements or benefits not included in this application.

Your estimated under payment/over payment is the difference between your anticipated tax obligation and your expected tax withholding (which includes your estimated tax payments).

Withholding for these types of income differs than standard withholding and the estimator doesn’t currently support the ability to provide these sorts of recommendations. If you’d like to make changes to your withholding amounts for Social Security benefits or unemployment compensation, please use the Form W-4V (PDF).

The tool does not include or ask for FICA or Medicare tax withholding in most situations. The tool does take additional Medicare tax, which some people with high incomes (depending on your filing status) must pay into account. To learn more about how additional Medicare Tax is accounted for, please read additional Medicare Tax FAQs.

About You Page

Rental income can be entered in the unearned income box on Step 2 once you select the corresponding box under Other Sources of Income on Step 1. Please ensure that this rental income is only personal rental income and not business related.

The application is designed to assist taxpayers adjust withholding on their regularly withheld income and limited to taxpayers with jobs or pensions that have regular federal income tax withholding.

Yes, the application is designed to account for jobs or pensions that haven’t started yet in order to estimate your anticipated tax obligation and your overall results. Please select "No" to the question “Do you expect to hold this job the entire year (Jan. 1 through Dec. 31)?” and then you will be able to select the dates you expect to hold this job.

For income such as dividends, interest, distributions from an IRA (not Roth IRAs), 401(k) or a trust, or other form of specialized income:

Select the checkbox that reads “Had withholding or made estimated payments for income such as dividends, interest, distributions from an IRA (not Roth IRAs), 401(k) or a trust, or other form of specialized income” on Step 1 and then enter the estimated tax payments in the input box on Step 2. Use this to account for estimated payments that have already been paid.

For self-employment income:

If you selected Self-Employment Income on Step 1, there will be a prompt on Step 2 under Self-Employment Income field to enter “Estimated federal income tax you paid toward self-employment income.” Use this to account for estimated payments that have already been paid.

Select the checkbox that reads “Receive unearned income such as dividends, interest, annuities, alimony, or a distribution from an IRA (not Roth IRAs), 401(k) or a trust” on Step 1 and then enter the amount for IRA distributions in the input box on Step 2.

You can enter an estimate of capital gains by checking the box on Step 1 that says “Receive unearned income such as dividends, interest, annuities, alimony, or a distribution from an IRA (not Roth IRAs), 401(k) or a trust.” You will then be given an opportunity on Step 2 to enter the amount you expect. Note, however, that the Tax Withholding Estimator does not currently take into account any lower tax rates that your capital gains may benefit from, but it will ensure that enough tax is withheld to more than cover that income.

Income and Withholding

Depending on your situation, there are one or two inputs for this question.

  • For a past job, we will ask for federal income tax withheld year-to-date.
  • For current jobs, we will ask for federal income tax withheld per paycheck and year-to-date. The last paycheck input refers to federal income tax withheld per paycheck.
  • If you’re filling this out in January and your most recent pay period ended in December of the previous year, then please input the federal income tax withheld per paycheck in the last paycheck input.

The application is designed to handle withholding on a bonus. For a bonus not yet received, enter the amount in the “any bonuses you expect to receive later this year” field. Then, you may select a checkbox right under that field if you know that your employer will withhold tax on the bonus for you.

Select Social Security Income checkbox on Step 1, then enter the amount in Step 2.

The pay period end date should be on your pay statement when the employer processes your pay for that period. For example, the pay period end date could be Friday, January 17, but the paycheck for that period might not be received until the Monday of January 27. In this case, you would use Friday, January 17 as your input to that question.

The Estimator does not currently accommodate RMDs.

Deductions

In the Gifts to Charity field on Step 4 (Deductions).

Adjustments

Deduction for contributions to an IRA outside of deductions included in payroll deductions field on Step 3 (Adjustments).

Penalty for Early Withdrawal of Savings on Step 3 (Adjustments).

Tax Credits

You should indicate on Step 5 (Credits) how many of your dependents are qualifying children. If you don’t have any qualifying children, the Estimator will automatically determine how much, if any, of the EITC you are eligible.

Results and Recommendations

That’s the most common need for line 3, but the Form W-4 instructions make it clear that line 3 can be used for any kind of credit.  Tax credits reduce your tax obligation dollar-for-dollar, so entering an amount on line 3 will reduce your withholding by that amount over the course of a year. 

The TWE uses line 3 to reduce your withholding when you are having too much withheld.  It determines the annualized amount to put on line 3 that will result in your preferred refund amount.

You may enter multiples of $500 up to the amount recommended by the estimator.  For example, if the estimator recommends that you enter $1,650 on line 3 of your W-4, then simply enter $1,500 into your payroll system; this is $150 less than the recommendation, so your expected refund will likely be around $150 larger than the preference you entered into the TWE.

If someone doesn’t submit any Form W-4 to their employer, the employer withholds a “baseline” amount from each paycheck.  Submitting a W-4 to your employer indicates how to deviate from that baseline amount of withholding in order to achieve your desired refund amount.  In your case, you will need a total of $X withheld from each paycheck for the balance of the year, which is $Y less than your current tax withholding. This means that your previous W-4 must have requested an additional amount to withhold from each paycheck (over and above the baseline) that was larger than $Z. So, reducing this amount to $Z will reduce your withholding and help you achieve the refund amount you prefer.

The recommendations are created by computing your expected tax withholding (baseline withholding for new jobs) and your anticipated tax obligation for the remainder of the year. If that total would leave you with a balance due at the end of the year, the Estimator determines the amount to withhold per pay period to enter on line 4(c) of your Form W-4. 

On the other hand, if that amount would create a scenario in which you are over withheld, the Tax Withholding Estimator determines the annual amount to enter on line 3 of your Form W-4 to reduce your withholding.

The slider range is determined by both your income and the amount of federal income taxes you currently have withheld in order to create achievable options based on these two factors.

The pre-filled Form W-4 does not include any of your personally identifiable information since the tool does not ask this information.  It includes the correct line and amount you need to have either over or under withheld.

 

Tax Withholding Estimator