If you have a fairly simple tax scenario, you can quickly estimate whether you’ll owe tax or receive a refund when you file your return. You have a simple return if you earn only W-2 wages, have no dependent children to claim and do not sell stocks or other capital assets during the year. While it's possible to perform estimates with other income sources or children to claim, it is a little more difficult to estimate accurately because other factors are involved that affect your end result. If you find yourself in a more complex tax scenario, it’s best to consult with a tax professional regarding your balance due or refund estimates.
Items you will need
- W2 forms or last pay stub
- Current tax forms and instructions
Gather your W-2 form or last paycheck stub. W-2 forms are usually provided to you from your employer by the end of January. If you don’t have your W-2, you can use your last paycheck stub instead. You’ll want to grab the same information from your spouse if you plan on filing a joint tax return.
Pull up the tax forms and instructions for the year you’re estimating. Current tax forms are available for free on the irs.gov website.
Find your gross income. This amount is shown in box 1 of your W-2. If you use your pay stub, look at “YTD Gross Earnings” and subtract any pre-tax deductions you elected from the YTD Gross amount. Examples of pre-tax deductions include health insurance premiums or retirement plan contributions.
Find your standard deduction amount. A standard deduction is amount the IRS lets you subtract from your taxable income, based on your filing status. Look at page 2 of the 1040 income tax form for the current year. Standard deductions for each filing status are listed in the upper left margin, near line 43.
Calculate your exemptions. The IRS allows one personal exemption for each person listed on the tax return. If you’re filing with your spouse, you’ll get credit for two personal exemptions. Exemption amounts change each year, so take a peek at page 2 of the current year 1040 form to determine the correct amount.
Subtract the standard deduction amount for your filing status, and your personal exemption amount from your gross income. The result is your federal taxable income.
Find the tax table for the current year. Tax tables are located near the end of the Form 1040 instruction book.
Locate your taxable income on the tax tables and match the amount with your filing status on the table. The amount shown is the tentative tax due for your income.
Find your federal income tax withholding. Your withholding is shown in Box 2 of your W-2. If you’re looking at pay stubs, look for “YTD Federal Income Tax”. Do not include any state, Social Security or Medicare tax withholdings for this step.
Subtract your federal withholding from the tax shown for your income on the tax tables. If you have a positive result, this is an estimate of the amount you will owe. If you have a negative result, this is an estimate of the amount you’ll receive as a federal refund.
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