Tips for Calculating W4 Tax Allowances

Sunbelt Tax Service provides tax preparation and consulting all year long. In operation for 5 years, Sunbelt Tax Service is dedicated to securing the highest possible refunds for its clients by identifying applicable deductions and helping clients understand important tax forms such as W4s.

Many companies require new hires to fill out W4 forms early in the onboarding process. The information in the W4 form calculates the tax amount that the employer will withhold from the employee’s paycheck. If this form is not filled out, or if no deductions are claimed, then the employer will withhold the highest possible amount. When the employee files their annual tax return, any overpayment will be returned as a refund.

If an employee would prefer to have more money throughout the year, they should include allowances. Allowances may be based on the number of people in a household or major financial changes, such as the purchase of a home or an additional income.

If too many withholdings are claimed, the employee may end up owing the IRS and possibly incurring penalties. Using tax figures from the year before can help estimate the most appropriate withholding amount. Further, W4s can be adjusted throughout the year to reflect any changes to the employee’s income or household.

The General Types of Business Taxes

Inspired by the philosophy of its owner Casey Earnest, Sunbelt Tax Service offers tax services that yield the highest tax refund to its clients. As the largest tax preparation business in the Jackson, Mississippi area, Sunbelt Tax Service is known throughout the community as a reliable preparer of personal and business tax returns.

According to the Internal Revenue Service, there are five different types of business taxes under US tax laws and regulations. They are as follows:

1. Income Tax

All businesses are required to file an income tax return, except for partnerships, which are required to file an information return. The appropriate forms to use for filing depend on the business structure. The federal income taxes are paid as income is earned during the taxable year. For individual employees, income taxes are usually withheld by employers out of their monthly paycheck.

2. Estimated Tax

Employees whose income taxes are not withheld by their employers may end up not paying sufficient income taxes. In this case, they are required to pay estimated tax, which must be paid regularly during the taxable year.

3. Self-employment Tax

The self-employment tax is imposed on individuals working for themselves who have net earnings of $400 and above. It is also imposed on persons working for churches or church-controlled organizations receiving wages of at least $108.28 and have opted to be exempted from Social Security and Medicare taxes. Payment of the self-employment tax will contribute towards the taxpayers’ social security coverage, which would provide them with Medicare benefits, disability benefits, survivor benefits, and retirement benefits.

4. Employment Tax

Employment taxes are collected from employers, who are required to file certain forms on behalf of their employees and to pay the corresponding amount of taxes. Employment taxes include federal income taxes withheld from compensation, Social Security and Medicare taxes, and federal unemployment taxes.

5. Exercise Tax

Excise taxes are collected from companies for operating in certain kinds of businesses, for manufacturing or selling certain kinds of products, for receiving payments for certain types of services, and for using different kinds of products, facilities, or equipment.