The Internal Revenue Service has tools to help taxpayers with pretty much any tax provision. If you’re trying to speculate your tax bill or refund, there is a way you can estimate taxes online.
Due to how we pay taxes and how we calculate the tax owed, there is always a chance that the government owes us money due to overpaying taxes. If paid under the tax bill, you might end up owing money to the government as calculating taxes is on a yearly basis, but paying taxes is per pay frequency or quarterly.
Take the Tax Withholding Estimator
How can I estimate taxes?
Take note that the estimator only works for taxpayers that are paying taxes through federal income tax withholdings. If you’re self-employed, estimate taxes using Form 1040-ES.
You’ll need to provide the tool with minimal information. Enter the following about yourself to estimate 2022 taxes online without a hassle.
- Filing Status
- Spouse Income if married
- Pension and General Income
- Other Income Sources such as SSA benefits
- Adjustments to your income (AGI)
- Anticipated deduction amount
- Anticipated tax credits
Upon entering this information, you’ll get an estimate of how much you’ll owe in taxes or refund amount. Here is an example of what you’ll see in the tax withholding estimator.
How taxes are paid?
If you’re an employee working for a company, your employer takes out a portion of your income every pay period and forwards them to the IRS on your behalf. This is how you pay taxes – on a check-to-check basis. Self-employed individuals pay their tax liability every quarter by estimating how much they owe to the IRS. However, the total payment for every quarter must be at least 90 percent of the employee’s tax liability.
As mentioned, there is always a chance that you will overpay taxes rather than paying exactly what you owe as these are calculated by puzzling out your income and owed tax. When you pay more than what you owe, Uncle Sam returns the amount overpaid but imposes an underpayment penalty when you don’t pay the full 90 percent.
It’s crucial to make sure you don’t owe taxes. Use the estimator for federal income taxes and see if you’re likely to get a refund or owe the IRS.
Frequently asked questions about estimating taxes
Why is this only an estimation?
The Internal Revenue Service can bring changes to the tax code, even after the tax season starts. For example, in 2021, the IRS introduced an exclusion where employees won’t owe tax up to $10,200 earned from unemployment compensation after the tax season started. Changes like these can alter a taxpayer’s tax bill – that said, it’s best to call it an estimate rather than a guaranteed result. Aside from that, the information entered on the “estimator” is limited compared to a fully completed federal income tax return.
Are tax estimates accurate?
To a certain degree, the tax estimates are very accurate in a way that isn’t too far off from the actual result you’ll see when completing a federal income tax return. Because you can complete the tax withholding estimator at any time during the tax year, don’t plan according to the results seen on the tool. Always plan ahead and perhaps for the worse to ensure that you don’t have any bumps in your financial life.
What do I need to estimate 2021 – 22 taxes?
As mentioned above, you’ll need to enter certain things about yourself, income, and withholding up to date. This includes, but is not limited to the following: filing status, dependent(s), spouse; pension; and general income, other income sources, and anticipated deductions/credits. Entering these will help the tool estimate your tax bill and refund.