For many of us refund amount we are to receive, or worse a requirement to pay, is an enigma. There are so many factors that can influence that amount because or situation can change so many times throughout the year. If you filed your tax return already and weren’t satisfied with the results, there are some things you can do to better control the final result when submitting your tax returns in 2016.
I recently came across the withholding calculator at IRS.gov that lets you monitor your situation at any time during the calendar year. To complete this exercise, I decided to input some fictitious numbers and then went through the process again making some changes and compared the outcome. The biggest benefit I find in this calculator is that it allows to better plan for the upcoming tax season. Some of us like to get that big refund check; it can be treated as a form of savings (with banks paying virtually zero percent on deposits you’re not leaving too much money on the table by depositing in your account every month) or a sudden windfall. Others prefer not to contribute too much and be as accurate with the tax withholdings as possible. In just 5 simple steps we can get a great insight into what may happen under different circumstances.
It is important to remember that the result will be an estimate, but it provides a solid planning tool. Whether you like to receive a large refund or not, the best part of this calculator is help in avoiding having a large tax liability when submitting a tax return.
To go through this exercise and see how you might do when filing taxes in 2016, check out this page at irs.gov.
Tax Withholding Calculator
First step, decide how will you file taxes:
Second, provide more information about anticipated credits or potential retirement.
Third, elaborate on your income. This is the part that will influence the final result the most.
Fourth, go over the applicable deductions.
And the last step, the results: