Full Information About Withholding Tax 2010 Online
Meaning of Withholding Tax
First Definition
An amount of an employee's income that an employer sends directly to the federal, state, or local tax authority as partial payment of that individual's tax liability for the year. When a anyone starts a new profession, he/she is required to fill up a W-4 form on which he/she can specify his/her filing position and the number of allowances he/she is claiming. Also called withholding.
Second Definition
Employee income taxes (such as PAYE) and supplementary government imposed deductions from dividends, salaries, earnings, and other incomes. Withholding taxes are levied at the spot of expense of incomes, and are passed on to the government by the entities collecting them.
The government changed this amount in the stimulus package put together by President Obama. The amount will allow between $45.00-$65.00 additional each month in take home pay. This could give you back almost $600.00 a year.
You will be taxed at the previous higher rates if your income level is upper than $95,000.00. This amount is doubled if you filed married filing jointly.
Try using the Free Tax Calculator to see if you are withholding enough tax from your paycheck.
How Withholding Tax Works?
As the majority of public living and working in the nation know, you are required to pay an income tax on your wages as you earn them. Every quarter you are expected to pay taxes on your income in the shape of estimated quarterly payments. Financial professionals advise that you try to adjust your withholding. Doing so minimizes any unnecessary monthly withholding and you will be able to keep any cash in your savings account. While this is generally good advice, there are risks involved especially if you adjust your withholding aggressively.
AFTER PAYG income tax withholding variation (ITWV)
Your taxable earnings is $38,000 ($50,000 - $12,000), so your tax payable is $11,400 (30% x $$38,000)
Your employer will withhold 30% ($11,400 per year) of your salary and send it to the tax man
This means your monthly pay slip is $3,216.67 ($38,600 / 12)
You will require to spend $1,000 for your investment expense monthly
This leaves you with $2,216.67 for your living expenses and savings per month
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