Is there a general guideline on what amount or what percentage of your income needs to be withheld to minimize owing additional taxes each year? Not sure if I have W4 dependent, deductions and other withholding set correctly for myself or my spouse. We usually owe several thousand a year.
The most accurate way to determine the correct withholding for your specific situation is to use the IRS Tax Withholding Estimator: IRS Tax Withholding Estimator. This tool will provide a personalized recommendation based on your income, deductions, credits, and filing status. Since you and your spouse usually owe several thousand dollars, using the estimator is especially important to fine-tune your W-4s.
Federal withholding thresholds depend on your filing status, dependents, and the information provided on your W-4 form. For example, a single filer with no dependents will have different withholding needs compared to a married couple filing jointly.
Adjust your W4:
Claim Dependents and Other Credits: Ensure you claim the right number of dependents on your W-4 form. More dependents/credits mean less tax withheld, while fewer credits mean more tax withheld.
Specify Additional Withholding: If you find that your current withholding is insufficient, you can specify an additional amount to be withheld on line 4(c) of the W-4 form.
Review Your Tax Situation Regularly: Major life changes like marriage, childbirth, or changes in income can affect your tax liability. Review and update your W-4 form annually or after any significant changes.
https://turbotax.intuit.com/tax-tools/calculators/w4/
Please see https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-a-w-4-form/L2NapDzX2 for more info.
@MonicaBees Thanks for the question!!