A payroll withholding calculator helps individuals determine how much tax is taken out of their paycheck. It lets an individual know the amount to be withheld based on certain criteria that is inserted into the calculator from the user.
The amount of income withheld has two determining factors: the employee’s income and the W-4 form that is filled out when the employee starts a new job. The W-4 form notes if the employee is single or married, how many allowances are claimed, and if the employee specifically states he wants more money withheld. The payroll withholding calculator takes into account all of this information, including the tax requirements of the state where the employee lives, and gives the estimated tax withholding owed from the employee’s paycheck.
Withholding is a portion of an employee’s earnings that is passed onto federal and state tax departments by the employer to cover specific liabilities such as Social Security and Medicare. This practice is preferred instead of an employee receiving all his income without any withholdings and then owing a large lump sum to the government at the end of the year. The amount withheld from an employee’s pay is an estimate of what could be owed. Based on the estimated withholding, the employee could either owe money to the Internal Revenue Service or receive a tax refund due to overpayment the previous year.