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We frequently receive the question “how many allowances should I claim with my employer?” We wish the answer was a simple, exact number.....
We are able to estimate the amount of taxes you will owe for any given year, but cannot tell you how that translates into specific allowances with your payroll.
This is because many factors come in to play regarding withholdings. Here are a few:
There are several ways to handle withholdings. Below are our suggestions based on your specific type of work.
For taxpayers with employee work only:
Use IRS Form W4 - Be sure to complete all applicable worksheets on that 2-page form. Then provide this form to your employer.
OR, use the IRS’ Online Withholding Calculator Tool. Caution: this tool will not estimate correctly if you will be subject to alternative minimum tax, self-employment, or other taxes. In these cases, you will want to refer to IRS Publication 505 mentioned below.
For taxpayers with self-employment income:
Have your tax preparer do an estimated tax analysis. This will reveal your estimated tax liability for the year, so you can adjust employer withholdings accordingly and/or pay estimated quarterly taxes.
To avoid surprises at tax time, IRS Publication 505 is the best resource for complete information on this withholding topic. Using this publication, you can estimate the total tax you will owe on your return and compare that with the total tax you’ll withhold for the year.
As you can see, the topic of tax withholdings can be very involved. There is no one-size, fits-all answer. Contact us with any questions...we’re here to help!