Taxation & Estate Planning

Calculate My Withholding Allowances

By Darrin Mish

From time to time, there are changes made by the authorities to the tax code.  These changes may be minor or major.  Both kinds of changes will inevitably affect taxpayers in some way or other.  One of the recent major changes in tax law is the introduction of the American Recovery and Reinvestment Act 2009 (ARRA) that has radically changed the way of calculating your total withholding allowances.  This article will give information on the major changes arising out of the ARRA this year.

Under the ARRA, a new provision has been introduced called 'Making Work Pay' tax credit which came into effect on April 1.  Your employer should automatically be taking this new credit into account when they deduct the total amount of tax from your pay check. If this is not done, you will not have enough money taken out during the year for your taxes.  And this in turn would result in you having to pay more when you file your tax returns next year.  The calculator that is on the IRS website has been configured to reflect these new numbers, so if you want to know how this new rule affects you personally, the website is where to go.

The 'Making Work Pay' tax credit only applies to earned income, not pension income.  This exemption is taken into account when you use the IRS website's online calculator to compute your withholding allowances.  Another notable change from last year to this year is the effect tax has on unemployment compensation.  Under the ARRA, the first $2,400 you are given through unemployment is now not taxable.  This will benefit those who are unemployed because it will exempt them from unnecessary taxes.

When you use the IRS' online calculator, any information you input into it is completely private and will not be shared with anybody, nor will it be saved. This is to safeguard the confidentiality of every taxpayer's personal tax figures.

The IRS' online calculator can be found at its website www.Irs.gov and can really help in figuring out how much tax should be withheld from your paycheck each and every pay period.  Knowing this information will help you plan your personal budget for the year.  It can also give you an idea if you will owe money at the end of the year or if you will get a refund.  Other factors also need to be put in place, but knowing how much withholding allowances you have is a big part of planning your financial future.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world.
If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Calculate My Withholding Allowances is a post from: IRS Tax Problem Solver Blog - IRS Help

Full post as published by IRS Problem Solver Blog on February 20, 2010 (boomark / email).