Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A paycheck's withholding is calculated period by period off a formula that assumes that period's pay repeats all year, so a bonus, a mid-year raise or a second job can throw the running total off in either direction without anyone noticing until the return is filed. Projecting the full year, rather than trusting one paycheck, is what actually reveals whether a refund or a balance due is coming.
Before you rely on it
What to check
Re-run the projection after any mid-year income change, a raise, a bonus, a new job, rather than assuming the original withholding election still fits.
The common error
Where people go wrong with tax withholding calculator
Judging withholding accuracy from a single paycheck's numbers. One period looking right says nothing about whether the full-year total will match the actual liability, especially with irregular income during the year.
Sensitivity evidence
How federal tax withheld year to date changes the projected refund or amount due
| Federal tax withheld year to date | Projected refund or amount due | Projected full-year withholding | Withholding coverage of projected tax |
|---|---|---|---|
| $9,600 | -$1,400 | $16,600 | 92.2% |
| $10,800 | -$200 | $17,800 | 98.9% |
| $12,000worked example | $1,000 | $19,000 | 105.6% |
| $13,200 | $2,200 | $20,200 | 112.2% |
| $14,400 | $3,400 | $21,400 | 118.9% |
Every input, tested
Which input moves the projected refund or amount due most
| Input | Tested from | To | Projected refund or amount due at each end | Swing |
|---|---|---|---|---|
| Projected annual federal tax | $16,200 | $19,800 | $2,800 to -$800 | $3,600 (360%) |
| Federal tax withheld year to date | $10,800 | $13,200 | -$200 to $2,200 | $2,400 (240%) |
| Federal withholding per remaining paycheck | $630 | $770 | $300 to $1,700 | $1,400 (140%) |
| Remaining paychecks | 9 | 11 | $300 to $1,700 | $1,400 (140%) |
Two variables at once
Projected refund or amount due by federal tax withheld year to date and federal withholding per remaining paycheck
| Federal tax withheld year to date \ Federal withholding per remaining paycheck | $560 | $700 | $840 |
|---|---|---|---|
| $9,600 | -$2,800 | -$1,400 | $0.00 |
| $10,800 | -$1,600 | -$200 | $1,200 |
| $12,000 | -$400 | $1,000 | $2,400 |
| $13,200 | $800 | $2,200 | $3,600 |
| $14,400 | $2,000 | $3,400 | $4,800 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Federal tax withheld year to date | $12,000 |
| Federal withholding per remaining paycheck | $700 |
| Remaining paychecks | 10 |
| Projected annual federal tax | $18,000 |
| Projected refund or amount due | $1,000 |
| Projected full-year withholding | $19,000 |
| Withholding coverage of projected tax | 105.6% |
Where the inputs come from
Federal tax withheld year to date comes from your latest pay stub, federal withholding per remaining paycheck is the amount taken each period now, and remaining paychecks counts how many are left this year. Projected annual federal tax is your best estimate of the total tax for the year, which you can get from last year's return adjusted for changes or from a full tax calculator. Include any other income such as freelance work or investments.
Using the projected refund or amount due in a real decision
If you will owe, adjust your W-4 now to spread the shortfall over the remaining paychecks.
When the result stops applying
The projection depends on the accuracy of the tax estimate, which changes if income, deductions or credits change during the year. Underpaying by too much can trigger a penalty unless you meet safe-harbor rules, generally 90% of this year's tax or 100% of last year's. Bonuses, side income and life changes such as marriage or a child alter the picture.
What to compare it with
Estimate the tax itself with the federal income tax calculator, and check your paycheck with the paycheck and take-home pay pages. The self-employment tax calculator handles those paying quarterly estimates. The QBI deduction and marriage tax pages show factors that change the projected tax.
People also ask
Frequently asked questions
How do I avoid an underpayment penalty?
Pay at least 90% of this year's tax or 100% of last year's, 110% if your income was high, through withholding or estimated payments.
Should I aim for a big refund?
Not usually. A large refund means you overpaid during the year and lent the government money without interest. A small refund or balance due is more efficient.
How do I change my withholding?
File a new Form W-4 with your employer, using the IRS Tax Withholding Estimator to choose the right adjustment.