Shocked by the size of the check you just wrote to the IRS? Or happily planning how to spend that large refund check? Ideally, your withholding should be sufficient to avoid penalties but not so high that you’re giving Uncle Sam a fat tax-free loan.
The IRS has a useful calculator to help you determine what your federal income tax withholding should be. Be aware that the calculator isn’t suitable for everyone. For example, if your income is hard to predict or you pay self-employment tax, the results won’t be as reliable. After you run the calculations, the site tells you exactly how to adjust your W-4 at work so you’re having the correct amount withheld. If you receive a pension or annuity you can use IRS Form W-4P to start or change withholding from these payments.
For the withholding calculator, go to http://www.irs.gov/individuals/article/0,,id=96196,00.html.