How to Use the W4 Calculator - YouTube

Hi Everyone my name is Tina Mason and Thank You  for watching. Today I am going to explain how  

and why you should correct your W4 using the W4  Calculator. One of the best ways to improve your  

personal finances is by increasing your cashflow.  Restructuring your expenses such as minimizing  

your taxes and or debt, can dramatically improve  your cash flow and provide you with solutions.  

One of the best sources to start the  process for obtaining extra cashflow  

is for a W2 employee to correct their W4. The IRS  states that approximately 80% of taxpayers overpay  

their taxes with an average refund of $3,000. This  W4 training will provide you with the education  

to shift those tax dollars back into your pockets  which will create positive cashflow that can be  

used to eliminate debt, invest, or improve your  lifestyle. The W4 Calculator helps you identify  

your tax withholding to make sure you have the  right amount of tax withheld from your paycheck.  

I'm going to share my screen. There are  several reasons to check your withholding.  

One of them is to protect against having too  little tax withheld and facing an unexpected  

tax bill or penalty at tax time next year.  Average refund $3,000 you may prefer to have  

less tax withheld up front and receive more  in your paycheck which is what we recommend.  

Disclaimer We do not guarantee you will receive  an increase in your check by adjusting your W4  

form. Results will vary based on each  individuals unique financial situation.  

I have an example family that  I will call the Johnson Family.  

Don't worry if your results are not the same,  just enter what you have. The Johnson family is  

filing married jointly. They have a household  income of $105,000 and they have 2 dependents  

ages 7 and 10. Their childcare  is $6,500 for this year.  

The Johnsons get their most recent paycheck stubs  to answer the questions for the W4 Calculator.  

Finding the calculator is easy. Open a Google  Search Engine Browser, type W4 calculator  

in the search bar and click search. Click Tax  Withholding Estimator | Internal Revenue Service.  

You're going to Review Tax Withholding Estimator  Page and read Recent Tax Law Changes for Taxpayers  

Who Itemize. Read this before you Begin,  but we are going to go ahead and proceed.  

Click Use the Tax Withholding Estimator. There  are 6 sections in the tax withholding estimator.  

Section one is about you. It is the information  that best describes how you anticipate filing your  

tax return. The Johnsons status is filing married  jointly and no one else can claim the Johnsons as  

a dependents on their taxes , so they click no.  The Johnsons will be claiming their 2 children  

as dependents on their tax return so they enter  2. Both Mr. and Mrs. Johnson will hold a job with  

federal income tax withheld and they both expect  to hold one job each. They enter a 1 in each box  

and the Johnsons do not receive  pensions. So, they click No.  

The Johnsons do not have any other sources of  income and tax payments. The Johnsons do not  

fit any of the demographics listed. If you do,  then go ahead and enter those there and click  

Next. Section Two. Income and Withholding is the  Income & Withholding for each job you earned from  

this year. Mr. Johnson plans to hold his job the  entire year so, he clicks Yes. Mr. Johnson is paid  

twice monthly. Mr. Johnsons most recent pay period  ends 2/19/21. Mr. Johnson earned $50,000 per year.  

Mr. Johnson does not expect any bonuses.  Year to date, Mr. Johnson has paid $524  

in federal taxes and from his last paycheck  he it showed he paid $131 in federal taxes.  

Mr. Johnson does not contribute to a 401k or other  cafeteria plan. He Selected No in each of those.  

If you do you would select Yes. Click the plus  sign to enter the spouses information and here  

we will enter Mrs. Johnsons answers. Mrs. Johnson  expects to have her job all year. so, she clicks  

Yes. Mrs. Johnson gets paid twice monthly and  Mrs. Johnsons pay period also ended 2/19/21.  

Mrs. Johnson earns $55,000 per year and Mrs.  Johnson does not expect any bonuses. Year to date  

Mrs. Johnson has paid $624 in federal taxes and on  her last paycheck she paid $156 in federal taxes.  

Mrs. Johnson also does not contribute  to a 401k or cafeteria plan. Click Next.  

Section 3: Adjustments to Income  are adjustments that will have  

a significant impact to your tax obligation.  The Johnson family doesn't know that they have  

adjustments to income so they click see  adjustments. The Johnsons do not have  

student loans, educator expenses or IRA's.  If you did you would enter those there.  

The Johnsons do not have health savings account  deduction, moving expenses, alimony paid,  

penalty for early withdrawal, or business  credits. The Johnson's do not have any  

adjustments to income. If you did you  would enter them there and click Next.  

Section 4: Deductions From Income. The Johnsons  qualify for a standard deduction of $25,100.  

The Johnson Family does not have more $25,100 in  itemized deductions so the Johnsons will take the  

standard deduction and click Next. Section 5: Tax  Credits. The Johnsons Qualify for tax credits for  

their dependents. Tax credits subtract  directly from the tax obligation.  

If you click see tax credits you'll see that the  Johnsons have 2 children under the age of 17.  

The Johnsons children qualify for the childcare  tax credit. So they entered 2. The Johnsons do  

not qualify for elderly or disabled, business,  alternative minimum tax, energy efficient vehicles  

credits. If you did you would enter those there  and click Next. Section 6 is the results. The  

results will show if you owe or receive a refund.  The Johnsons will have a tax obligation of $3393.  

The Johnsons will pay $6888 in taxes and  over pay $2895. That Equates to about $241.25  

per month that they are overpaying in  taxes if they do not update their W4.  

The Johnsons learn about the advantages of  investing and owning a home-based business.  

They decide to invest $2895 into their 401k. So,  

the Johnsons go and click on the tab income and  withholdings link and select Yes. Then they enter  

the amount that they're going to  contribute to their 401k, $2895.  

Then still select No for the Cafeteria fund.  

Then they go over to the adjustments to income  tab. The Johnsons learn about the advantages  

about having a home-based business and decide to  get started in a home-based business. They go over  

to the adjustments to income link. The Johnsons  estimate they will have $5000 in Schedule C  

Business Loss. Note: that withholding estimator  does not show the full list of adjustments  

to the income which includes Schedule C Loss. This  is why the Johnsons entered $5000 in the Certain  

business credits for reservists, performing  artists, and fee-based government officials box.  

The Johnsons click on the results tab  after making the change to their 401k  

contribution and adjustments to income  to see what changes occurred, if any.  

By contributing to their 401k and starting a  home-based business, the Johnsons now have a  

tax obligation of $3045. The Johnsons picked  up an extra $948 by making these 2 changes.  

Because the Johnsons learned how to income  shift with two simple strategies they  

improved their finances in three ways. The  Johnsons redirected their tax overpayment  

into their 401k. The Johnsons employers matched  the 401k dollar for dollar and investing in  

their 401k and starting a business lowered  their taxes by $948! I hope you found this  

information helpful and if you have any questions,  message me for more information. Have a great day!