Worldwide studies show 80%–90% of all sediments eroded from watersheds is trapped within river networks such as reservoirs, ponds, and wetlands. To represent the impact of impoundments on sediment routing in watershed modeling, Soil and Water Assessment Tool (SWAT) developers recommend to model reservoirs, ponds, and wetlands using impoundment tools (ITs). This study evaluates performance of SWAT ITs in the modeling of a small, agricultural watershed dominated by lakes and wetlands. The study demonstrates how to incorporate impoundments into the SWAT model, and discusses and evaluates involved parameters. The study then recommends an appropriate calibration sequence, i.e., landscape parameters calibration, followed by pond/wetlands calibration, then channel parameter calibrations, and lastly, reservoir parameter calibration. Results of this study demonstrate not following SWAT recommendation regarding modeling water land use as an impoundment depreciates SWAT performance, and may lead to misplaced calibration efforts and model over‐calibration. Further, the chosen method to model impoundments’ outflow significantly impacts sediment loads in the watershed, while streamflow simulation is not very sensitive. This study also allowed calculation of mass accumulation rates in modeled impoundments where the annual mass accumulation rate in wetlands (2.3 T/ha/yr) was 39% higher than mass accumulation rate in reservoirs (1.4 T/ha/yr).