Monday, November 21, 2011

How to calculate tax refund in US


Most of us are very happy to see the fat tax refund check or refund in bank account from IRS....surely HDTVs,laptop,tablets might be going through the minds of many,but in reality we are loosing some money for that.

The reason why we get a huge refund is mostly due to the fact that we were paying the government too much as tax on our income throughout the year.A withholding tax allowance is simply a number that you can claim on your W4 form that will change the amount of your income that your employer will withhold from you throughout the year. The number of allowances can vary, but is most likely 0, 1, 2 or 6. The higher the allowance number, the less tax will be withheld from you with each paycheck. A W4 is filled out by an employee when they start employment. Allowances on a W4 can be updated at any time by filling out a new one. Most employers will allow you to do this whenever you desire  and your withholding tax amounts should take effect in your next full pay period (normaly next month).

So imagine if you were not paying government more than required tax and were investing that for high return. That's what my point is. You were loosing this high return..... 

There are numerous website to calculate tax allowances.Some are listed below.You may consult a tax professional if you are still unclear..

IRS Withholding Calculator
H & R Block withholding calculator

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