The first element of the new tax legislation enacted earlier this month will go into effect on July 1 as federal income tax rates are rolled back one percentage point for the top four income tax brackets. This means an individual's disposable income will rise and may run the risk of paying too much in taxes or, even worse, owing the IRS on April 15.
So how do individuals know how much they should withhold from their paycheck given the new tax law changes? Another powerful new tool is now available from the experts at TurboTax®, the #1 tax preparation software. The TurboTax Withholding Wizard, a complete W-4 calculator, available at www.turbotax.com, guides taxpayers through the process of determining the right amount to withhold from their paycheck.
In just a few minutes, the TurboTax Withholding Wizard determines the number of exemptions and the withholding status an employee should claim on their Form W-4 for 2001. The Withholding Wizard determines federal income tax liability for the year based on all income and deductions, not just wage income. By determining the amount of tax an employee needs to withhold for the remainder of the year, the Withholding Wizard gives individuals the ability to make smart decisions on whether or not they should change their withholding status and by how much.
Anne Schetter-Clark, Senior Tax Analyst for TurboTax, recommends that employees evaluate withholdings at least twice a year.
"We're six months into the year and the tax rate cut is the ideal opportunity to make sure your employer is withholding the correct amount of income tax from your paycheck," said Schetter-Clark. "This is especially true if you have other sources of income such as gains or losses on stock sales, self-employment income or exercised stock options. You simply enter this information along with your wages and income tax withheld to date to see whether your current rate of withholding still covers your tax liability."
TurboTax.com is the online destination for tax information, tips and tools to empower consumers to effectively plan for, organize and manage their taxes while learning more about, and getting the most from, recent tax law changes.
About TurboTax
Quicken TurboTax is the No.1-selling tax preparation software program, with more than 80 percent retail revenue share this tax season, up eight points over tax year 1999, according to NPD Intellect (formerly PC Data). Its web-based counterpart, TurboTax for the Web, is the most popular site for online tax preparation and filing services. In addition, Intuit offers TurboTax Home & Business, designed for the sole proprietor. The Automated Tax Return feature, which automatically imports common tax data into TurboTax, is included at no additional charge in all of these versions of TurboTax. With 17 years of personal finance expertise, the TurboTax family of products saves time and money for more than 13 million Americans each year.
