Challenges using the tax calculator

[Smacdon]

I know that I need to adjust my W4 because last fall I started a new job with a higher salary, and when paying taxes this spring, we owed enough that there was a penalty added. Clearly, my spouse and I need to adjust so that more taxes get withheld.

However, using the tax calculator isn't very straightforward for me, since my income isn't even throughout the year. My paychecks this spring (& thus the amount withheld) have been higher than they will be for the rest of the year, so using the figures on my most recent paystubs doesn't lead to an accurate reflection of my current salary.

Any tips for using the tax calculator effectively?

[marctu · Accepted solution]

Thank you for the question.   The tax calculator does not completely cover uneven income situations, such as yours.   I would annualize both your income and your spouse's before using the calculator and then adjusting the question "Your Taxable Income Per Pay Period" based upon this annualization, which would mean dividing the annualized income by the number of pay periods for the year and then entering that amount in the cell.   I would also take what you consider a "normal paycheck" and input that tax withholding in the cell for "Federal Income Tax Withheld Per Pay Period".  This would adjust for the fact that the tax calculator may not completely cover uneven income situations.