If you are trying to estimate your income tax during the year, you can do so by using a tax calculator rather than preparing an entire return. However, you can do more than just estimate your income tax bill. You can use calculators to determine the correct amount of withholding, how IRA contributions affect your income taxes, the effect of major life events on your tax return and even get an idea of what your refund will be.
Using IRA contribution calculators
Not everyone knows right away whether they will see some income tax savings by making contributions to an IRA retirement account. However, TurboTax takes the guess work out of making this decision with its IRA Retirement Calculator.
By entering some information such as your annual earnings and filing status, the calculator estimates the tax savings you will recognize with your IRA contributions and even whether a Roth or traditional IRA is a better option for you. The best part about using TurboTax calculators is that anyone can use them and it doesn’t require any personal information such as your name or Social Security number.
How life events affect your tax return
TurboTax also offers a free Life Events Tax Calculator that provides you with the potential tax savings of each major life event that occurs during the year such as getting married, having a baby or even purchasing a home.
For example, by entering your income, filing status and the amount of mortgage interest, points and real estate taxes you pay, the calculator can provide you with an estimate of how much tax you can save by purchasing a home. This can be an incredibly useful tool to evaluate the after-tax cost of purchasing a home.
Estimating your refund
All taxpayers who anticipate an income tax refund are curious how much they are getting. To figure this out, you can use the free TaxCaster from TurboTax.
Like the other calculators, you enter your filing status, age and various information about your income, estimated tax payments and deductions and credits you anticipate claiming. The software will generate an estimate of the refund you should expect based on the information you provide.
Keep in mind though that your refund estimate is only as accurate as the information you provide. So as circumstances change during the year, just revisit the TurboTax website to update your refund estimate.
Estimating the correct tax withholding
You never want to pay the IRS more than you need to during the year through withholding payments. That’s why the IRS provides a withholding calculator to help you estimate the correct amount of allowances to claim on your W-4.
The online tool requires you to provide extensive information on your finances in order to obtain the most accurate withholding estimate. In addition to some of the basic filing and income information, it may benefit you to evaluate the amount of deductions and credits you qualify for before accessing the tool since these can affect the number of allowances you claim.