Tax Withholding Estimator FAQs

Select the “Investment income” box on page 2, then select the “Rental income, royalties” box. Please ensure that this rental income is only personal rental income and not business related.

The estimator is designed to help you complete a new Form W-4 to give to your employer to adjust the amount of federal tax withheld from your regular pay. It can take other sources of income into account, but tax on those income sources would be withheld from your job.

Yes, the estimator is designed to account for jobs or pensions that haven’t started yet. Please select "No" to the question “Do you expect to hold this job the entire year (Jan. 1 through Dec. 31)?” and then you will be able to select the dates you expect to hold this job.

Use the section at the bottom of Step 2 marked “Estimated tax payments” to account for estimated payments that you already made.

Toward the bottom of Step 2, under the heading “Other sources of income,” select the checkbox that reads “Other sources of income,” then enter your IRA distribution amount in the box provided.

Toward the bottom of Step 2, under the heading “Other sources of income,” you can enter an estimate of capital gains by checking the “Investment income” box, then checking the box relevant to your types of capital gains.​​​​​

Depending on your situation, there are a few inputs for this question.

• For a past job, we will ask for federal income tax withheld year-to-date.
• For current jobs, we will ask for federal income tax withheld per pay period and year-to-date. The “per pay period” input refers to federal income tax withheld per paycheck.
• If you’re filling this out in January and your most recent pay period ended in December of the previous year, then please input the federal income tax withheld in that pay period.

The estimator is designed to handle withholding on a bonus. For a bonus not yet received, enter the expected amount in the “I am getting a bonus” field for that job.

At the top of Step 2, treat Social Security income as a second, separate job.  (This tool is designed to help you adjust the withholding on your job to account for federal income tax that may be due on your Social Security income, rather than having tax withheld directly from your Social Security payments.)

The pay period end date should be on your pay statement when the employer processes your pay for that period. For example, the pay period end date could be Friday, January 17, but you might not receive the paycheck for that period until the Monday of January 27. In this case, you would use Friday, January 17 as your input to that question.

Treat RMDs as “Other sources of income” at the bottom of Step 2.

Enter these amounts in Step 3 (Adjustments to Income) in the field “Deduction for contributions to traditional IRAs (not Roth IRAs or contributions from payroll)”.

Enter these amounts in Step 3 (Adjustments) in the field “Penalty for early withdrawal of savings”.

In Step 4 (Deductions), click on the button “Yes, see if I will itemize”. Then click on the “Gifts to charity” button.

In Step 4 (Deductions), click on the button “Yes, see if I will itemize”. Then click on the “Medical and dental expenses” button.

If you have qualifying children, you should indicate each child’s age on Step 5 (Credits). If you don’t have any qualifying children, the estimator will automatically determine the amount of EITC you’re eligible for.

We recommend you check your inputs for federal income tax withheld on Step 2. Common mistakes made on this page can greatly impact the amounts reflected in results:

• Double-check to make sure the “Year to date” field includes the total federal income tax withheld and the “Per pay period” field includes only what was withheld for that pay period.
• Ensure you are referencing your most recent 2020 paystub and not one from a previous year.
• Double-check the income you have entered. If your job is for a partial year and not the full year, please make sure to adjust your income accordingly.

For jobs you currently hold: The expected tax withholding is projected by multiplying the estimated number of pay periods remaining for the year by the amount withheld per pay period, then adding that product to the withholding to date. The tool adds any estimated tax payments made or any other taxes paid for other sources of income in the expected tax withholding calculation to determine the total amount expected to be paid for the year.
For jobs that have not started yet: The application uses the standard withholding amount based on your filing status and estimated income. You can request deviations from the standard withholding on a Form W-4, and the tool will instruct you how to make those adjustments.

The Tax Withholding Estimator uses your filing status, income, adjustments, deductions, and credits to estimate your anticipated tax obligation. Your actual tax obligation may differ from this if the amounts you entered are incorrect or if your situation involves tax requirements or benefits not included in this application.

Your estimated under payment/over payment is the difference between your anticipated tax obligation and your expected tax withholding (which includes your estimated tax payments). Your expected tax withholding is the amount of federal income tax we project you will have withheld this year if you do not change your current withholding arrangement.

Withholding for these types of income differs from standard withholding and the estimator can’t currently provide these sorts of recommendations. If you’d like to make changes to your withholding amounts for Social Security benefits or unemployment compensation, please use Form W-4V PDF. However, you may choose to have tax withheld from your wages to cover the tax on your Social Security benefits and unemployment income. If you enter those types of income into the Tax Withholding Estimator, its recommendation will account for them in your wage withholding.

The tool is intended to help you complete Form W-4 to adjust the amount of federal income tax to have withheld from your wages.  Form W-4 does not address FICA or Medicare.  Therefore, the tool does not include or ask for FICA or Medicare tax withholding in most situations. However, the tool does take into account additional Medicare tax, which some people with high incomes must pay with their tax return. To learn more about additional Medicare tax, please read additional Medicare tax FAQs.

Form W-4 is used to adjust an employee’s income tax withholding up or down relative to the standard withholding amount, given the employee’s filing status and wage amount. Prior to 2020, employees could decrease withholding by claiming an appropriate number of allowances, and they could increase withholding by entering a specific additional amount to withhold from each paycheck.  Those were the only two possible entries, and employees generally used either one or the other (since those two lines worked in opposite directions). The Tax Cuts and Jobs Act of 2017 eliminated personal and dependent exemptions, and because withholding allowances were equated with exemptions, it was best to move away from using withholding allowances. So, beginning in 2020, Form W-4 offers employees four ways to change their withholding:  step 3 to reduce the amount of tax withheld; step 4(c) to increase the amount of tax withheld; step 4(a) to increase the amount of income subject to withholding; and step 4(b) to decrease the amount of income subject to withholding. These four possibilities are all related. For example, steps 4(a) and 4(b) work in opposite directions, so the amounts could be combined into one net amount of additional income or reduction to income. Similarly, steps 3 and 4(c) could be combined into one net amount by which to increase or decrease the amount of tax to withhold. So, there’s no need to use more than two of these four steps on the W-4, and if steps 4(a) and 4(b) don’t apply, then the W-4 may need only one number (on either step 3 or step 4(c)).  Also, the Form W-4 instructions say that when an individual or couple holds multiple jobs at once, the amounts needed on steps 3, 4(a), 4(b), and 4(c) should go on the W-4 associated with the highest-paying job; the W-4s for all other jobs should have zeros (or blank) for these four steps, which will result in the standard amount of withholding for the marital status indicated in step 1 of the W-4.

That’s the most common need for step 3, but the Form W-4 instructions make it clear that step 3 can be used for any kind of tax credit. Tax credits reduce your tax obligation dollar-for-dollar, so entering an amount on step 3 will reduce your withholding by that amount over the course of a year. Step 3 can also be used to reduce your withholding when you have had too much withheld already this year.  In fact, the Tax Withholding Estimator can also use step 3 to account for all deductions and adjustments to income that would otherwise be accounted for on step 4(b).  This would allow you to limit the amount of information you need to provide your employer on Form W-4, protecting your privacy.

The TWE uses step 3 to reduce your withholding when you are having too much withheld.  It determines the annualized amount to put on step 3 that will result in your preferred refund amount.

You may enter multiples of $500 up to the amount recommended by the estimator.  For example, if the estimator recommends that you enter $1,650 on step 3 of your W-4, then simply enter $1,500 into your payroll system; this is $150 less than the recommendation, so your expected refund will likely be around $150 larger than the preference you entered into the estimator.

If someone doesn’t submit any Form W-4 to their employer, the employer withholds a standard amount from each paycheck. Submitting a W-4 to your employer indicates how to adjust that standard amount of withholding to achieve your desired refund amount. In your case, you will need a total of $X withheld from each paycheck for the balance of the year, which is $Y less than your current tax withholding. This means that your previous W-4 must have requested an additional amount to withhold from each paycheck (above the standard amount) that was larger than $Z. So, reducing this amount to $Z will reduce your withholding and help you achieve the refund amount you prefer.

The recommendations are based on the following steps:

1. Determine the amount of tax you want withheld this year, which is the sum of your anticipated tax obligation and the amount of refund you prefer (if any).
2. Subtract the amount of tax you have already had withheld this year (including an estimate of how much more will be withheld before you’re able to submit a new Form W-4).
3. Subtract the amount you would have withheld from now to the end of the year if you had the standard amount of tax withheld during that time (this is the amount that your employer would withhold, given your filing status and wage amount, if you left W-4 steps 2 through 4 blank).
4. If the result is positive, you need more than the standard amount withheld for the balance of the year, so the estimator converts the result to an amount per pay period and recommends that you enter that on step 4(c).
   If the result is negative, you need less than the standard amount withheld for the balance of the year, so the estimator recommends that you enter the annualized version of that on step 3.

The pre-filled Form W-4 does not include any of your personally identifiable information since the tool does not ask for this information. It may pre-fill either step 4(a) or step 4(b) (to change the amount of income subject to withholding) and it may pre-fill either step 3 or step 4(c) (to change the amount of tax withheld directly). See Why does the tool’s recommendation include only one or two amounts to enter on Form W-4? above for more information.