Estimating a refund

We are only a few weeks away from 2010 and a new tax year.  Are you planning on getting a refund from your 2009 withholdings?  Do you have any idea how much it will be?  Do you want to change your withholding so you can keep more of your money during the year instead of giving it to the government interest free until April 15th?

 

H&R Block has a free “2009 Tax Estimator” which can be very simple or very involved.  It even calculates itemized deductions (such as mortgage interest and charitable donations) to give you a ball-park figure on how much you can expect to get back or how much you may owe.  I ran a quick down-and-dirty example on myself and it looks like I may owe $500.00.  If that is true then I am really glad I know now so I can save up the money to pay the taxes I would owe.  Here is how I estimated my tax liability for 2009 while there are still 2 months left:

1. Gather the big documents: This is just an estimate, so you don’t want to pull out the shoebox of receipts quite yet.  But to be somewhat accurate you will need: Most recent paystubs (for both you and your spouse), the most recent mortgage statement, and your budget or expense tracking software to help identify certain once-a-year expenses like property taxes, home owner’s insurance, or any business income or expenses from 2009.
2. Figure out how many more paydays there are left in the year.  For example, my wife and I have 5 paydays left each.
3. From the most recent paystubs: Figure out how much is withheld in federal and state income taxes each payday, multiply that by the number of paydays left in the year, and add that to the amount of taxes that have already been withheld this year (also on your paystub).  For example:  Each paycheck I have $151 in federal income tax withheld on average.  I have 5 paydays left, which means I should have an additional $755 to be withheld this year.  Add $755 to the $3,540 already withheld through October 14th for a grand total of $4,295.  Do this for your state taxes and mortgage interest too.
4. Go to H&R Block’s website (the direct link is http://www.hrblock.com/taxes/tax_calculators/index.html) and start answering the questions.  It’s easy.

There is no membership or log-on needed.  Remember, this is an estimate so the final result will not be the actual amount you will file.  I now have time to either change my W-4 (the form you fill out to tell your company how many dependents and how much you want to have withheld from your paychecks) or save the money if I truly do owe this year.