Are you having enough withheld from your check every time you get paid so that (1) you don’t owe the IRS at year end or (2) so that you can get a refund at year end? How do you determine if you are withholding the proper amount? Do you even care either way? What difference does it make?
These are questions that I get asked every tax season. There is a rule of thumb and that is that you should have at least 10% of your yearly income withheld from your pay check and that should go towards your federal withholding not your medicare and social security. These two will automatically come out your pay check each time. Have you heard of FICA which stands for Federal Insurance Contribution Act? This must come out of your check unless you are a minister that had this exemption taken in the first year of being ordained. Your FICA should total about 7.5% of your gross wages for the year. That is 6.2% for Social Security and about 1.45% for Medicare. However your federal withholding is something totally different.
The main goal in my opinion is to never owe the IRS anything. So in order to do this you need to know a few things. You need to know the total of exemptions (people that you will include on your tax return) you are claiming, your taxable write offs; for example do you own a home that you are currently paying interest on, do you have medical expenses and/or mileage, do you have educational write offs, do you have child care expenses and there are tons of others. These are some of the things that can reduce your taxable include resulting in you having a smaller tax liability or possibly some money back in your pocket.
If you have any questions or concerns regarding this information or any other tax concern please contact me at email@example.com or 972.569.7938.