I am so tired of being surprised by how much I owe in taxes come Jan-April.
How can I predict what I'll owe next year for this year's earnings?
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.Sign up to join this community
One option is to look at the IRS Witholding Calculator - As George Marian notes, this is by no means a perfect way to "estimate" how much you'll owe.
Other key questions for you to answer:
There's no silver bullet here. The best you can do is to understand the key inputs into how your taxes are calculated, and then identify the most important tax deductions that you might take. Then pray that you haven't missed some nuance and use a tax program early in January to check your assumptions so you're not completely surprised when April rolls around.
A final suggestion: do your own taxes using a website like TurboTax. Take the time to "itemize" your tax deductions just to learn what is tax deductible. You can figure out how the big parts of tax law works by just looking at what you could deduct in the future.
The government wants money and isn't particularly interested in you getting your deductions right. Doing the worksheet on the back of the W-4 will give you a much better idea of how many deductions you can take.
While many people are excited to get a tax refund, a refund means you loaned the government money all year long without getting paid interest for your generosity. The IRS will penalize you for underpaying your taxes in amounts larger than $1000 or 10% of your income, but a good ballpark estimate aiming for about ~$100 in payment at tax time is a relatively safe way to get all your money sooner than later.
If you have a relatively stable income and deductions you can get a fairly good estimate using last year's tax bill.
Suppose you paid $12000 of actual taxes last year and you are paid once a month. If you plan to make a similar amount of money with similar deductions, you need each monthly paycheck to have $1000 of federal income taxes withheld. I go to a paycheck calculator and find the withholding required to make sure I have that amount withheld every paycheck.