Over 71 Million Tax Returns e-Filed in 2020! - Why eFile?

W-4 Tax Withholding Taxercises

At the beginning or throughout each year we encourage you use the PAYucator to estimate your current tax year - now 2021 -  paycheck IRS tax withholding before you complete and submit the W-4 to your employer(s).

Taxercise Your
Paychecks, W-4s

Start the PAYucator first before you complete the 2021 W4-Form here on eFile.com. You should not have to complete a complicated worksheet but rather use the PAYucator calculator to determine your 2020 Tax Withholding. After that, estimate your 2021 Tax Return due in 2022. If you don't like the 2021 tax return estimated results keep adjusting your 2021 IRS Tax Withholding until you are pleased with the expected results.

Ask yourself which of the following 2021 Tax Return and Paycheck Goals you would like to pursue now. 

Taxometer: Tax Balance Goals, Steps to Take

Below are simple to follow considerations when planning tax withholding amounts for your 2020 W-4 Form(s) so you meet your 2020 Tax Return goals in 2021.

  • Step 1: Did you file a 2020 Tax Return in 2021? If so, review this return now. If you e-Filed through eFile.com, your return is stored under My Account - sign in now. If you did not file via eFile.com or don't have a copy of your Tax Return, you can order a transcript or copy of your 2020 Tax Return.
  • Step 2: Decide on your 2021 Tax goals based on past Tax Return(s). If you never filed a return, ask yourself the Tax Balance questions as listed below or contact one of the eFile.com Taxpert for a free discussion.
    • If you received a 2020 Tax Refund in 2021 select the goal : Decrease your 2021 Return Refund in 2022.
    • If you owed Taxes with your 2020 Tax Return select the goal: Decrease your 2021 Taxes Due in 2022.
    • If you didn't get a Tax Refund nor owed Taxes with your 2020 Return in 2021 select the goal: Keep My Tax withholding the same in 2021 the same as in 2020.
  • Step 3: Use the free 2021 W-4 Tax Withholding Calculator and estimate your 2021 Tax Return, now.
  • Step 4: Use the PAYucator now before you complete the Easy W-4 Form accordingly and submit it to your employer(s) once you have determined the right tax withholding amount that meets your 2021 Tax Return goals.
  • Step 5: Contact a eFile.com Taxpert to discuss your 2021 Tax Strategy.
adjust your paycheck withholding

This section is being updated for Tax Year 2020. Please contact a Taxpert for free tax withholding support.

2021 W-4 Allowances Goals, Adjustments

2021 Tax Return
Adjustment
Paycheck, 2021 Tax Return Effects due in 2022
Goal: Decrease your 2021 Return Refund in 2022.
Action: Increase Dependents or Deductions on your 2021 W-4. Estimate with the PAYucatorContact us for your exact details.
Result: Your IRS tax withholding will decrease and your net Paycheck will increase now or per subsequent pay period. What you do not know is whether you will actually decrease your Refund or owe Taxes when you e-File your 2021 Tax Return in 2022. In order for you to find out now before you submit your W-4 to your employer and estimate your 2021 Return now: Start the free W-4 Tax Calculator. If it shows a Tax Refund, increase your Dependents and/or Deductions now. If it shows Taxes owed, decrease Dependents or Deductions now. Dependents and/or Deductions on the new 2021 W-4 are what Allowances were in 2020.
Goal: Increase your 2021 Return Refund in 2022
Action: Decrease Dependents and/or Deductions. Estimate with the PAYucator. Contact us for your exact details.
Result: Your IRS tax withholding will increase and your net Paycheck will decrease now or per subsequent pay period. What you do not know is whether you will actually get a Refund or owe Taxes when you eFile your 2021 Tax Return in 2022. In order to find out now before you submit your W-4 to your employer and estimate your 2021 Return now: Start the free Tax Withholding Calculator. If it shows a Tax Refund, increase your Dependents and/or Deductions now. If it shows Taxes owed, decrease Dependents or Deductions now.
Goal: Decrease or Eliminate Taxes owed in 2022
Action: Increase your Dependents/Deductions on your W-4 during 2021.  Optionally, on your W-4 add a Dollar Amount of Taxes to be withheld per pay period. Contact us for your exact details.
Result: Your net Paycheck will decrease. What you do not know is if the Allowance adjustment will result in your goal not to owe Taxes in 2020. Find out now before you submit your W-4 to your employer and estimate your 2020 Return now: Start the free 2020 W-4 Tax Withholding Calculator. If it shows Taxes owed decrease your W-4 Allowances now. If it shows a Tax Refund, increase your W-4 Allowances now. Do this cycle until you are happy with the expected results of no refund and no taxes owed or any other tax balance goal listed here.
Goal: No Tax Refund, No Taxes Due in 2021
Action: Keep Your W-4 Deductions/Dependents the same.
Result: Your net Paycheck might increase or decrease. What you do not know is if the Deduction/Dependents adjustment will result in your goal not to owe Taxes nor to expect a Tax Refund when you eFile your 2021 Tax Return in 2022. Find out now before you submit your W-4 to your employer and estimate your 2020 Return now: Start the free W-4 Tax Calculator. If it shows a Tax Refund, increase your W-4 Dependents/Deductions now. If it shows Taxes owed, decrease your W-4 Dependents/Deductions now. Do this cycle until you are happy with the expected tax return goals.
Goal: Self Imposed Tax Refund Penalty! What is this?
Action: Read on and run the numbers if you had a Refund this year or expect one next year. Contact us for more details.
Result: Yes, you will penalize yourself financially with a Tax Refund in 2022 Period. Of course, you might have other reasons to get this refund, as in: - I'm so used to get my Refund, I know it doesn't make financially any sense. Or, I don't have self discipline, a tax refund is a way to save and so on. We get it, there is always a reason not to do something :)!  However, we are here to help you with the cold, hard numbers at the tune of 18% per year: Find out if you suffer under a self imposed Tax Penalty Syndome?

W-4 Case Studies

You will find two 2021 W-4 case studies, one for Taxes Owed in 2020 and one case for a 2020 Tax Refund. If your 2020 Tax Return reflected one of these scenarios and your 2021 income, deductions, filing status has not or will not change significantly, you can lean on your 2020 Tax Return results when planning your 2021 W-4.

Tax Return Refund Case Study Summary

 

Item
Period
Amount
Step 1 - Add up your 2021 IRS Tax Withholding: Include you, and your spouse’s, IRS Federal Tax Withholding from each paycheck this year. Be sure to add Withholding from previous jobs you had in 2021 and estimate your Tax Withholding amounts for current jobs through the end of 2021. In our example, we had $400/month withheld resulting in $4800 of IRS Tax Withholding for all of 2021 (Jan 1 - Dec 31).
Tax Year 2021
$4,800
Step 2 - Estimate your 2021 Tax Refund: Estimate for all of 2021 your Total income, tax withholding, deductions etc.  Estimate your 2021 Tax Refund now and enter the tax withholding amount below the W-2 Wage income section in the eFile.com Tax Withholding calculator. In this example the est. Refund is $2,100. Continue to re-estimate your 2021 Tax Refund should income, deductions etc. change.
Tax year 2021
$2,100
Overpaid Tax Withholding for 2021: The estimated 2021 Tax Refund is effectively the amount overpaid in Tax Withholding for the year 2021. In this example: Est. Tax Refund $2,100 = Over Tax Withholding.
Tax Year 2021
$2,100
Adjusted Tax Annual Withholding for 2021: If you divide the est. tax refund amount $2,100 by the remaining months or pay periods for 2021 - 7 months - you will get an amount you have to subtract from your current pay period withholding amount: $2,100 divided by 7 = $300.
Less/pay period
-$300
New Pay Period Tax Monthly/Annual Withholding: Current monthly tax withholding from Jan. 1, - May 31, 2021 = $400 minus adjusted  $300/pay period IRS withholding from June 1 - Dec. 31, 2021 = $100 new per month total IRS withholding amount. The effective annual tax withholding will be $2,700 instead of $4,800.
Per Pay Period
$100
Step 3 - Adjust your W-4: When you use the eFile.com Paycheck Calculator you will find recommendations on who to increase or decrease your paycheck tax withholding by changing the entries on your W-4 form. For example, you can increase or decrease your dependents or deductions. Keep in mind the W-4 is a planning tool a tax return is not.
Per Pay Period
Step 4 - Create new W-4, submit to Employer(s): Complete your W-4 Form as often as needed. In other words, you can submit this as often as you wish to your employer(s). Realistically, review the IRS withholding amount on your paycheck(s) and make adjustments accordingly based on the results of Step 1 above and your W-4 tax balance goals. Create your W-4 now. Go back to the 2021 Tax Return Calculator and estimate your Taxes/Refund for 2021 with the new adjusted total IRS Tax Withholding amount.
Per Pay Period
Form W-4
Result: From June 1 - Dec. 31, 2020 per month paycheck will increase by $300. The 2021 Tax Return Refund in 2022 will be $0 or tax balanced for Tax Year 2021
Paycheck Increase
$300
Step 5 - Monitor Paycheck IRS Tax Withholding: As soon as you receive the new paycheck(s) based on your latest W-4 entries, add up all monthly IRS tax withholding amounts. If the total withholding amounts exceeds $100/month increase your Dependents number again by at least "1" and recalculate the results with the Paycheck Calculator. Then change your W-4(s) accordingly and submit it to your employer again. Continue with this approach until you are at $100/month of IRS total tax withholding for the remainder of 2021 or close to that amount. Please contact our Taxpert via the link below Step 4 if you need assistance.
W-4
Allowances

Tax Return Tax Liabilty/Taxes Owed Case Study Summary

If you owed Taxes on your 2020 Tax Return and your goal is not to owe Taxes on your 2021 Tax Return - due in 2022 - follow the steps below. Financially speaking, if you have the money and money saving discipline, you could save the pay check tax withholding funds and pay your Taxes owed in 2021. Depending on the amount you might owe in 2021 and the money saving interest rate, it might be an option for you. Again, this approach requires saving discipline to avoid potential IRS and State late payment penalties. Otherwise, follow the steps below to plan for a tax balance in 2021.

 

Item
Period
Amount
Step 1 - Add up your 2021 IRS Tax Withholding: Include your, and your spouse’s, IRS Federal Tax Withholding from each paycheck this year. Be sure to add all Withholding from previous jobs you had in 2021 as well and estimate your Tax Withholding amounts for current jobs through the end of 2021. In our example, we had $108.33/month withheld resulting in $1300 of IRS Tax Withholding for all of 2021 (Jan 1 - Dec 31).
Tax Year 2021
$1,300
Step 2 - Estimate your 2021 Tax Return: Estimate all your, and your spouse's, 2021 total Income, Tax Withholding, Deductions etc.  Estimate and Calculate your 2021 Tax Return now and enter the Tax Withholding amount below the W-2 Wage income section in the eFile.com Tax Return and Withholding Calculator. In this example, our Tax Withholding Estimator resulted in Taxes Owed or Tax Liability on the 2021 Tax Return of $1,400. Continue to re-estimate your 2021 Tax Refund should income, deductions, etc. change.
Tax year 2021
$-1,400
Underpaid Tax Withholding for 2020: The estimated 2021 Tax Owed is effectively the amount underpaid in Tax Withholding for the year 2021. In this example: Est. Tax Liability or Taxes Owed is $1,400 = Underpaid Tax Withholding.
Tax Year 2021
$1,400
Adjusted Tax Annual Withholding for 2021: If you divide the estimated Taxes Owed amount, $1,400, by the remaining months or pay periods for 2021 - 7 months - you will get an amount you have to add to your current pay period withholding amount: $1,400 divided by 7 = $200.
Add/pay period
+$200
New Pay Period Tax Monthly/Annual Withholding: Current monthly Tax Withholding from Jan. 1, - May 31, 2021 = $108.33 plus adjusted $200/pay period IRS withholding from June 1 - Dec. 31, 2021 = $308.33 new per month total IRS withholding amount. The effective annual tax withholding will now be $2,700 instead of $1,300.
Per Pay Period
$308.33
Step 3 - Adjust your 2021 W-4: Start with the the eFile.com Paycheck Calculator and you will find recommendations based on your paycheck's pay period on who to increase or decrease your paycheck tax withholding per pay period by changing the entries on your W-4 form. For example, you can increase or decrease your dependents or deductions. The W-4 is a planning tool a tax return is not, thus you can alter dependents to plan out your tax withholding. You can only enter dependents on your tax return you are eligible to claim.
Per Pay Period
Allowances
Step 4 - Create new W-4, submit to Employer(s): Create a new 2021 W-4 Form as often as needed in order to get your tax withholding right. In other words, you can submit this as often as you wish to your employer. Each employer will need separate W-4. Realistically, review the IRS withholding amount on your paycheck(s) by pay period and make adjustments accordingly based on the results of Step 1 above and your W-4 tax balance goals. Create a new W-4 now and go back to the 2021 Tax Return Calculator and estimate your Taxes/Refund for 2021 with the new adjusted total IRS Tax Withholding amount.
Per Pay Period
Form W-4
Result: From June 1 - Dec. 31, 2020 total per month paycheck(s) will decrease by $200. As a result the 2020 Tax Return Refund or Taxes Owed in 2021 will be $0 or Tax Balanced for Tax Year 2020
Paycheck Decrease
$200
Step 5 - Monitor Paycheck IRS Tax Withholding, Adjust Dependents/Deductions: As soon as you receive the new paycheck(s) based on the Dependents/Deductions, add up all monthly IRS tax withholding amounts. If the total withholding amounts is below $200/month decrease your Dependents or Deductions number again by at least "1" and submit your W-4(s) to your employer(s) again. Continue with this approach until you are at $200/month of IRS total tax withholding for the remainder of 2021 or close to that amount. Please contact our Taxpert via the link below Step 4 if you need assistance.
W-4
Dependents

Please let us know any further details or questions you may have to help you tax balance and tax plan. Financially speaking, you could save the additional $200 in tax withholding and earn interest on the amount and pay the amount of $1,400 in Taxes Owed by the next Tax Day. This however, assumes that you have the discipline to save these funds so you have them available to pay your taxes and avoid potential IRS and state late payment fees.

 

ReviewIT

WatchIT