How big will your tax refund be? As tax season begins many people start wondering whether or not they’ll receive a tax refund. Unless you work with a CPA or tax professional, you’ve probably done your own homework to determine the appropriate amount of withholding allowances from your paycheck. Getting this right is important. Otherwise, you might end up owing the IRS. But, you might over pay your income taxes which isn’t exactly a good thing either.
While it’s too late to change your tax situation for 2012, you should consider 2013 and how much you’re having withheld from your paycheck. This type of planning at the beginning of the year will help insure you have an adequate amount withheld, but not pay the IRS more than you need to. After all, that extra money might come in handy when you need to save more or pay off debt.
Unless you’re working with a professional, you can use a tax refund estimator on the Internet to help you do your tax planning. Here are three tax refund estimator calculators you may find helpful in planning for 2013 taxes. All of them have the same end result, so it’s up to you to find the one you think you prefer, or find easiest to use.
Note: I recommend using a tax refund estimator 2- 3 times per year to make sure you’re not over paying. It takes just a few minutes to enter the data and perform the calculation.
The free H&R Block tax calcuator is broken up into 3 simple steps to you enter data: personal information, income and expenses. The fourth and final step show the results, or how much in taxes the calculator determines you’ll owe based on the information you entered. There is nothing too special about this calculator. It’s a basic tool, but will get the job done.
TurboTax also has a free calculator called the TaxCaster. I prefer this calculator because of the way they’ve organized the data entry and it’s very easy to use. It also shows display your estimated refund real-time, or or as you enter data. As with the H&R Block calculator, you first enter your personal information and income. The last step calls for you to enter information across different categories for deductions, credits and payments. This steps includes such categories as home and donations which are common for most people.
Note: this calculator can also be download as a free iPhone application.
IRS Withholding Calculator
Finally, the IRS Withholding Calculator gets the job done too. I’ve used their calculator the most in the past and find it serves my needs. Note: they state their calculator does not yet reflect all the 2011 tax laws, but it’s still a close comparison and may be good for you to use for estimating purposes. The IRS Withholding calculator works very similar to the TaxCaster in that it asks you to enter personal information, income and then your deductions. This calculator makes a suggestion in the results on how many withholding allowances you may want to consider specifiying on your W-4.
Tips for Using a Tax Refund Estimator
Before getting started, you need to first collect some information successfully use an online calculator to estimate your taxes. I’ve always found having the below information in front of me necessary:
- Your last two pay stubs
- Last years income tax return
- Estimated values for deductions
Note: Estimated values for deductions will work, but it’s better to be conservative than estimate too high. Therefore, I always refer to last year’s deductions and estimate if I think my deduction will be more this year.
What Should You Do with the Results?
Once you have your results, you’ll know if you can expect to receive a refund. If you’re going to get a large refund, you may want to consider increasing your employee withholding allowances on your W-4 to minimize the refund and get more money in hand to each month. Download Form W-4 from the IRS.
Which tax refund estimator do you prefer?
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