When you receive your IRS W-2 form each year from your employer, box 2, "Federal income tax withheld," shows the amount of tax money your employer deducted from your pay and sent to the IRS to cover the income taxes you owe. It's basically a savings account to cover your tax liability. The amount you get back depends on factors such as the amount of actual taxable income you had for the year, your assessed taxes and whether you had the right amount of taxes withheld to cover that amount.
Starting Your Federal Income Tax Return
You'll need to complete IRS Form 1040EZ, 1040 or 1040A to determine the final amount of your withheld taxes you'll get back, if any. You may also have tax money coming from your state, and need to file a state income tax return to get any overpayment of your taxes back.
You'll see your total annual income on the IRS W-2 form, box 1 "Wages, tips, other compensation." This is the total pay you received for the year from your employer, and it's the amount you would enter on line 7, in the "Income" section of IRS Form 1040. In this section, you'll enter any other forms of income you receive, such as dividends, capital gains, alimony or unemployment income.
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Adjustments That Change Your Income
As you work through your income tax return, enter any income adjustments such as pre-tax payments made into your Individual Retirement Arrangement (IRA), a health savings account, or student loan interest you paid during the year. When you finish this section, you'll arrive at your Adjusted Gross Income (AGI).
Taxes, Credits and Deductions
Now it's time to add up any tax deductions you're eligible for, such as medical bills that exceed 7.5 percent of your AGI, if you're filing taxes for the 2017 tax year. If you choose to itemize actual expenses you've paid during the year, you must come up with at least enough expenses to meet the IRS standard deduction. Otherwise, just take the standard deduction and save yourself the effort.
If you're single or married but filing separately, you can take a standard deduction of $6,350 for tax year 2017. Married couples filing jointly and qualifying widow(er)s can take a $12,700 standard deduction, and those filing as Head of Household get a $9,350 standard deduction. Now, you can add any tax credits you qualify for such as the Child tax credit, Education credit or a credit for after-tax money you contributed to a retirement plan. Finally, use the IRS tax tables in the Form 1040 instruction booklet to figure out the actual tax amount you owe.
Tax Money Withheld and Reported on Your W-2
The number of withholding allowances you claim for your paycheck plays an important part in the amount you'll get back on your taxes. The more withholding allowances you choose when filling out IRS Form W-4 for your employer, the less income taxes your employer withholds from your paycheck. This gives you more cash upfront but could hurt you at tax time if you didn't have enough money withheld to cover the income taxes you owe. From your Form W-2, take the amount in box 2 and enter it on your tax form on the appropriate line in the payments section. Do the subtraction to find out the amount you get back from the taxes withheld and shown on your W-2 form.
Adjusting Your Withholding
If you need to adjust the amount of tax money you have withheld from your paycheck, you can fill out the worksheet for Form W-4 to find the right number of allowances to claim. If you've already done this and want to further refine the amount of tax money withheld, you can either ask your employer's payroll personnel to help you refine the calculation based on your specific needs, or use the IRS Withholding Calculator on the IRS.gov website.