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If you've attempted to take profits in this volatile market or plan to do some selling in the future, your 2000 tax bill may be drastically different from last year's. And while 1999's numbers are painfully fresh in your mind, now's the best time to revisit your

Form W-4

-- Employee's Withholding Allowance Certificate


If you expect your income to be higher this year than last, you need to adjust the amount of taxes withheld from your paycheck so you won't wind up owing Uncle Sam any unnecessary interest and penalties.

Fortunately, the tax-preparation companies offer some good Form W-4 calculators that take some of the guesswork out of the process.

Your goal is to owe Uncle Sam money next year. Yes,



"You want the largest possible balance without interest and penalties so the money stays in your pocket all year" -- rather than in Uncle Sam's, says Martin Nissenbaum, national director of personal-income tax planning at

Ernst & Young


To avoid interest and penalties, your federal withholding and/or your estimated tax payments must equal either 100% of last year's federal income tax or 90% of your projected 2000 federal tax bill, whichever is less. (If your 1999 adjusted gross income exceeds $150,000, the total must equal 108.6% of last year's bill.)

How to ensure you've withheld enough?

"A quick and dirty way is to take your 1999 tax balance due, divide by number of pay periods left in the year, and ask payroll to add it in," suggests Kathy Burlison, an

H&R Block

TheStreet Recommends

senior tax specialist.

Let's say your tax due on line 68 of your 1999

Form 1040

-- U.S. Individual Income Tax Return

was $2,000. If you are paid semimonthly, you have 17 pay periods left for the year. So ask to have an additional $118 ($2,000/17) withheld from each remaining paycheck.

If you got a big refund, it's not so straightforward. You've got to add some exemptions to Line 5 of your Form W-4.

But what's an exemption worth?

Take the 2000 personal exemption amount of $2,800 and multiply it by your tax bracket. If you're in the 31% tax bracket, then each exemption is worth $868 annually (0.31 x $2,800). If you got a refund of $2,000 in 1999 and you project a similar income for 2000, add three exemptions to Line 5 of Form W-4. That means approximately $2,604 will stay in your pocket (on an annual basis). Remember, the more exemptions on Line 5, the less withheld from your paycheck.

Don't Crunch Yourself

But enough numbers-crunching. Let the tax-preparation-software companies do the work. You'll need your 1999 tax return and your most recent pay stub to use these products and services because they all require you to estimate your 2000 income.

And if you exercised nonqualified stock options or are receiving a bonus this year, don't forget to factor that in. In most cases, taxes on both are withheld at a flat rate of 28%. But if you're in a higher ordinary-income tax bracket, say 39.6%, you'll owe the difference come April. So you'll need to account for that in your planning.'s

Web site has a pretty conclusive

withholding calculator. (And at this point, there have been no reported

technical glitches with it, either.) It will calculate a dollar amount that should be withheld from each paycheck for the rest of the year.

TurboTax for the Web or TurboTax software that you buy in stores and install on your PC will help you calculate your withholding and print out the completed W-4 for you. Go to the "Miscellaneous" section of the program and choose "Adjusting Your Withholding or Making Estimated Payments" from the EasyStep Navigator.

Once you've determined just how many exemptions should be withheld from your salary, check out the

withholding calculator from


. The calculator will give you an idea of how your take-home pay will change. Note that this calculator can't factor in additional flat-dollar withholding amounts.

The IRS has its own

calculator, but it just mimics the oh-so confusing Form W-4.

If you prefer speaking with someone, call the

live preparers at at either 800-531-5166 or 888-893-9645. "They'll calculate the whole thing for free," says Kathy Travis, the site's chief operating officer. You do not need to be a return user. Or stop in a local H&R Block office, where preparers will help you calculate your withholding amount for free.

For more information on Form W-4, see this previous

Tax Forum and the

Internal Revenue Service's

Publication 505

-- Tax Withholding and Estimated Tax


Send your questions and comments to , and please include your full name. Tax Forum appears Tuesdays, Thursdays and Saturdays.

TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.