Paycheck and Tax Calculator

[pezdispenser]

I have made a Google Spreadsheet that automatically calculates your take-home pay and your tax return. Feel free to download a copy and modify it to your personal situation.



Link to spreadsheet

The tax withholding is based on the new 2020 Form W-4 with the box in Step 2 not checked for a single person in the 24% tax bracket. For other situations, you'll have to modify the calculation according to the instructions in IRS Pub 15-T: About Publication 15-T, Federal Income Tax Withholding Methods | Internal Revenue Service

You can post any feedback and comments here.

This is how I keep track of my taxes and make adjustments to my withholding and 401(k) to avoid any surprises at tax return time. It's especially important when you have investments because no taxes are withheld on those and the IRS will penalize you if you owe too much.

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[thinkblue]

I have made a Google Spreadsheet that automatically calculates your take-home pay and your tax return. Feel free to download a copy and modify it to your personal situation.



Link to spreadsheet

The tax withholding is based on the new 2020 Form W-4 with the box in Step 2 not checked for a single person in the 24% tax bracket. For other situations, you'll have to modify the calculation according to the instructions in IRS Pub 15-T: About Publication 15-T, Federal Income Tax Withholding Methods | Internal Revenue Service

You can post any feedback and comments here.

This is how I keep track of my taxes and make adjustments to my withholding and 401(k) to avoid any surprises at tax return time. It's especially important when you have investments because no taxes are withheld on those and the IRS will penalize you if you owe too much.

Thank you! I downloaded and plugged in my numbers. How do you come up with the formula for calculating federal tax in column J?

 

[pezdispenser]

Thank you! I downloaded and plugged in my numbers. How do you come up with the formula for calculating federal tax in column J?

It's based on Worksheet 1 in IRS Pub 15-T.

1a-c. First you get your annual taxable wages by multiplying by 26 or whatever your case is (you'll convert back by dividing by 26 at the end).

The next step depends on if you submitted a new 2020 Form W-4 to your employer.

1d-i. If you did, then you add the amount in 4(a) on your Form W-4 and subtract the amount in 4(b). Then if you didn't check the box on Form W-4 Step 2 for multiple jobs, subtract $8,600/$12,900 MFJ (this accounts for part of the standard deduction).

1j-l. If you haven't filed a new 2020 Form W-4, then you multiply the number of allowances you claimed by $4,300 and subtract that from your wages.

2. Use the "2020 Percentage Method Tables for Automated Payroll Systems" in IRS Pub 15-T to find the amount of tax. Note that these are all $3,800/$11,900 MFJ higher than the usual tax brackets that are commonly published because they account for the rest of the standard deduction. (The $8,600 subtracted before + $3,800 = $12,400 standard deduction). In the spreadsheet I just subtracted the $3,800 separately so that I could use the usual tax brackets.

Also, I just combine all the lower tax brackets to make the calculation simpler. i.e.:

9875 x 10% + (40125-9875) x 12% + (85525-40125) x 22% = 14605.50

Since all those tax brackets are 'full' you just have to do the next tax bracket:

(taxable wages - 8600 - 3800 - 85525) x 24% + 14605.50

Some sources do the calculation for you like this one: 2020 Federal Income Tax Brackets - BrightHedge

Step 2h is where you divide back by 26.

Step 3 is for the child tax credit.

Step 4(c) is for any extra withholding.

 

[pezdispenser]

Now updated for 2021, for those eager to stay on top of their taxes, like me!



Link to spreadsheet

 

[thinkblue]

Do you have an updated 2022 version? Thanks!

 

[pezdispenser]

Do you have an updated 2022 version? Thanks!

Sure!
Link to spreadsheet

 

[Toughlove]

Sure!
Link to spreadsheet

I owed Uncle Sam for 2020 tax return. Same salary as 2019. I don’t know what went wrong. Can you please tell me more about the the new W-4? I’m sure mine was updated with my HR Dept.

 

[pezdispenser]

I owed Uncle Sam for 2020 tax return. Same salary as 2019. I don’t know what went wrong. Can you please tell me more about the the new W-4? I’m sure mine was updated with my HR Dept.

There could be all sorts of reasons.

Do you have a lot of investment income such as interest, dividends, capital gains, rental income? Investment income does not have any tax withheld so you have to increase your tax withholding, or make estimated tax payments, to avoid owing that tax on your tax return.

The W-4 was completely changed in 2020 and they removed the concept of allowances. Now, even if you don't put anything on your W-4, $8,600 single/$12,900 MFJ is deducted by default, which accounts for part of the standard deduction. Before, people would often claim 0 allowances which would result in more taxes being withheld and a larger tax refund.

They have also removed the option for married people to have taxes withheld at the higher single rate. Now you have to choose MFS or MFJ. If you choose MFJ and both spouses work, then you MUST complete one of the methods in step 2. Otherwise, the taxes withheld will be far too low and you will owe a massive amount and could be penalized as well on your tax return.