- Feb 4, 2006
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Lots of angst because of the new tax law. Mainly people owing big when they usually receive a refund. This is because employers have withheld much less under the new rules in many cases, leading to a large amount owed even though many tax rates have been reduced.
The best scenario is to 'break even' at tax time. That way you have had the use of all your money throughout the year. This is great for paying down those high interest rate credit cards (the government pays you nothing for using your withholdings during the year, meanwhile you're paying interest to others unnecessarily).
If your earnings don't change much, and you are able to sit down with your boss in this regard you can easily fix this problem.
Simply take last year's "tax due" as a guide for this year's State and Federal withholding as this is the approximate amount of withholding needed to break even or close to it. Divide that number by the number of pay periods (weekly, bi-weekly, monthly, etc.) and voila, you have the correct amount to be withheld from each paycheck to break even. Raises can be easily figured in as well.
You're welcome.
The best scenario is to 'break even' at tax time. That way you have had the use of all your money throughout the year. This is great for paying down those high interest rate credit cards (the government pays you nothing for using your withholdings during the year, meanwhile you're paying interest to others unnecessarily).
If your earnings don't change much, and you are able to sit down with your boss in this regard you can easily fix this problem.
Simply take last year's "tax due" as a guide for this year's State and Federal withholding as this is the approximate amount of withholding needed to break even or close to it. Divide that number by the number of pay periods (weekly, bi-weekly, monthly, etc.) and voila, you have the correct amount to be withheld from each paycheck to break even. Raises can be easily figured in as well.
You're welcome.