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How much tax should be withheld

how much tax should be withheld

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For Employees

Collect your W-2 forms from all of your jobs. If you only have one employer, there will only be one form to check.

Look to Box 4 of the W-2 form to find the amount of Social Security tax withheld.

Add all of the numbers in Box 4 together to determine the amount of Social Security tax withheld during the year. For 2012, Social Security taxes are limited to the first $110,100 you earn. If your only income is from employers, you should not pay more than $4,624.20 (4.2 percent of $110,100) in Social Security taxes. If your total exceeds this amount, you may be entitled to a refund of some of the money that was withheld. If you find that too much was withheld, you can file a Form 843 to request a

refund of the excess.

For the Self-Employed

Total all of your self-employment income for the year. For example, you may have had $34,000 in self-employment income.

Multiply your income total by 92.35 percent. For example, if you had $34,000 in self-employment earnings, 92.35 percent would total $31,399. If this amount is less than $400, you do not have to pay Social Security taxes. If it is over $400, you must pay as detailed below.

Multiply the amount in Step 2 by 13.3 percent. For example, if you had $31,399 in qualifying earnings as figured in Step 2, you would owe $4,176.07 in Social Security taxes. Social Security taxes are part of self-employment taxes; the other part is the 2.9 percent Medicare tax. When you file your return, you can deduct half of your self-employment taxes from your taxable income.

Category: Taxes

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