How do I figure out

[timetosave]

Ok, I'm actually looking into changing my deductions...how do I figure this out? I searched it but I am not finding a calculator that tells me based on my income how many deductions I should be taking...I'm at 0 now.

thanks

[timetosave]

2007 Withholding Calculator


I can't figure this out...


Help

[creditcardfree]

Try the irs website IRS Withholding Calculator

This link also mentions checking out IRS Publication 919 for special situations.

I recently increased our withholdings from 5 to 9, by actually reading the
W-4 front and back and filling out the worksheets. This seemed the most accurate for our situation. With 5 withholdings we received 1900 back this past year...next year we will still get at least 500 back increasing ours to 9. That gives us over $100 more in our paycheck each month that we can use towards our other financial goals.

I'd also say start slow based on your past fears. If the calculations say withhold 6...maybe you start with 3 or 4...just to help your comfort level. Just a thought.

Also checkout this website to figure how adjusting your withholding will affect your actual paycheck PaycheckCity.com - Paycheck Calculator

[timetosave]

Boy do I have a lot to learn...

I honestly have no idea...I've been to the IRS tax withholding calculator twice and HAVE NO CLUE WHAT I'M DOING...I HATE THIS.

[creditcardfree]

http://www.irs.gov/pub/irs-pdf/fw4.pdf

Here's the W4 that you could print off and see if it helps.

[creditcardfree]

The witholding calculator on the irs asks questions as though you are doing your tax return, but a year ahead. So it wants to know what you have deducted for withholding already, how many children you have, how much you expect to deduct in interest, ect for next year. It can be confusing if you don't normally do your taxes.

In fact at the top of the withholding calculator page it says the w4 worksheet is more accurate for most people. So maybe forget about the calculator and try the worksheet or even paycheck scenarios on that other link I gave you. This is one of the hardest things to help people with online in my opinion.

[jIM_Ohio]

There are so many calculators- the one above, there is one with turbo tax, I assume quicken has another on their web site, and our paychecka are electronic thru ADP, and my paycheck web site has the same calculator. I would assume ADP has one on their web site too.

If you are confused, spend $40 for turbo tax federal, and fill out your tax return (again) in TT. It will ask you towards end if you want an ammended W-4, it will generate this and you can print/sign/give to your employer.

I have 7 federal withholdings, married filing jointly, and still got $2000 back this year. One other issue is we tend to get 4 figures back from federal, and tend to owe state each year... so I do agree you need to go at this conservatively if in a high tax state.

One note is this will "Lower" your tax bill for 2008 because you'll have to pay taxes on the 7k you got back this year. If you got another refund in 2007, same issue in 2008. Eventually this would catch up to you. Lowering refund each year. The most important thing is to know WHY the refund was so large and know if this is typical or a 1 year blip.

I just ran thru this calculator in 5 minutes, which included registering
PaycheckCity.com - Form W-4 Assistant

first hit when googling paycheck calculators

it told me

claim 0 allowance(s) on line 5 of the Form W-4.
- enter $106.25 on line 6 of the W-4.

[kv968]

Originally Posted by jIM_Ohio

One note is this will "Lower" your tax bill for 2008 because you'll have to pay taxes on the 7k you got back this year. If you got another refund in 2007, same issue in 2008. Eventually this would catch up to you. Lowering refund each year. The most important thing is to know WHY the refund was so large and know if this is typical or a 1 year blip.

I don't understand what you're trying to explain here Jim. It sounds to me like you're saying you have to claim the 7k refund from this year as income next year. If so, that's not the case.

[timetosave]

Originally Posted by kv968

I don't understand what you're trying to explain here Jim. It sounds to me like you're saying you have to claim the 7k refund from this year as income next year. If so, that's not the case.

Thank you for saying that...I received the same amount last year and did not have to claim it this year...why that does not even make sense to me...

I do however, give up on these online calculators. I've never prepaired my taxes by myself and have no idea what they are asking for. I will call payroll on Monday, maybe they can help me figure it out.

[jIM_Ohio]

Originally Posted by kv968

I don't understand what you're trying to explain here Jim. It sounds to me like you're saying you have to claim the 7k refund from this year as income next year. If so, that's not the case.

Maybe it's an Ohio thing, but the 2k refund I got back this year was income Ohio has not taxed yet.

Think about it... I overpaid my federal taxes and got a refund (which effectively increased my income). Yet the state has not seen that income (they think I have paid taxes on all my income based on paycheck withholdings), and therefore taxes the refund. This was income from 2006 paychecks, which I received in 2007... then my 2008 return for Ohio must reflect the additional 2k I made in 2007 from money not taxed in 2006.

NY did the same thing when I lived there, it is not unique to Ohio.

[jIM_Ohio]

Originally Posted by timetosave

I do however, give up on these online calculators. I've never prepaired my taxes by myself and have no idea what they are asking for. I will call payroll on Monday, maybe they can help me figure it out.

Feel free to use ignorance as an excuse... but sounds to me like the same discipline you lacked to put you into this situation is the same discipline you need to get you out. Some follow through will teach you what you need to know going forward.

Why do you get 7k back? Who did your taxes? They should be able to help you with this. Accountant, Husband or computer program all could take care of this.

[creditcardfree]

I think payroll should be able to do a few simulations for you that could show you how much would be taken out each check based on different withholding amounts.

Looking at your tax return that you just filed, what was the actual tax that you paid. I think ours was less than $200 to federal, so everything above $200 withheld is what we received back. My point is that if your situation isn't expected to change and you know you paid $x in taxes for 2006, you want to have at least that much withheld throughout 2007. So in our case we need to have at least $17 withheld for federal taxes each month. I figured that by taking $200/12. But by claiming 9 exemptions on my husbands w4 we are actually having about $60 withheld...so we will still get a refund next year too.

You will get it figured out. Maybe payroll could even help you through the
w4 form and worksheets. Or what about your bank that did your tax return, can they provide you any advice? Just a thought.

[creditcardfree]

Originally Posted by jIM_Ohio

Maybe it's an Ohio thing, but the 2k refund I got back this year was income Ohio has not taxed yet.

Think about it... I overpaid my federal taxes and got a refund (which effectively increased my income). Yet the state has not seen that income (they think I have paid taxes on all my income based on paycheck withholdings), and therefore taxes the refund. This was income from 2006 paychecks, which I received in 2007... then my 2008 return for Ohio must reflect the additional 2k I made in 2007 from money not taxed in 2006.

NY did the same thing when I lived there, it is not unique to Ohio.

Jim, I know exactly what you are talking about. We have had that issue in Nebraska. However, I think the OP, will get very confused by this and it may not be handled this way in every state. There can also be some reasons when it would not be considered income the following year, which happened to us this year. I think it is because we had zero tax liability the year before with state and federal...combat zone exclusions, ect. So I think we need to let this one rest for now.

[jIM_Ohio]

Originally Posted by creditcardfree

I think payroll should be able to do a few simulations for you that could show you how much would be taken out each check based on different withholding amounts.

Looking at your tax return that you just filed, what was the actual tax that you paid. I think ours was less than $200 to federal, so everything above $200 withheld is what we received back. My point is that if your situation isn't expected to change and you know you paid $x in taxes for 2006, you want to have at least that much withheld throughout 2007. So in our case we need to have at least $17 withheld for federal taxes each month. I figured that by taking $200/12. But by claiming 9 exemptions on my husbands w4 we are actually having about $60 withheld...so we will still get a refund next year too.

You will get it figured out. Maybe payroll could even help you through the
w4 form and worksheets. Or what about your bank that did your tax return, can they provide you any advice? Just a thought.

You can bump up allowances, or in case of paycheck site I referenced they tell me to "just put 106.25 on line 6". This is twice a month paycycle and 24*106.25=$2550, which is darn close to the refund we got this year.

If she gets paid 26 times a year and got 6593 back, I think 6593/26 on same line would come close. $253 each check.

[kv968]

Originally Posted by jIM_Ohio

Maybe it's an Ohio thing, but the 2k refund I got back this year was income Ohio has not taxed yet.

NY did the same thing when I lived there, it is not unique to Ohio.

Hmmmm, never claimed it here in NJ. Hope "The Man" doesn't come looking for me Sorry if we're confusing the OP. I'll stop.

[disneysteve]

I find that calculating the proper number of exemptions to avoid a big refund is very difficult. Just when I think I've figured it out, something changes in our financial situation to screw it up. A couple of years ago, for example, my wife decided somewhat suddenly to go back to work. That totally changed our tax situation. Then last year, she became eligible for her company's 403b plan, so our situation changed again. A few years ago, a tax cut went into effect that altered things. So each time I adjust my exemptions, I still seem to end up with more than I wanted as a refund.

The point of all this, OP, is to advise you that even if you work through the calculations now, midway through the year, run the numbers again using year-to-date data and make sure you are still on track for where you want to be.

By the way, I seem to recall reading somewhere (might have been on this board), that there is an approximate dollar value to each exemption. Does anybody know what I'm talking about? I want to say it was in the $3,000 range but I can't find anything to support that.

[jIM_Ohio]

Originally Posted by kv968

Hmmmm, never claimed it here in NJ. Hope "The Man" doesn't come looking for me Sorry if we're confusing the OP. I'll stop.

Are you an accountant? I know what TT asks me.

There was a year or two we used a new computer and different computer (one year I used my home PC, the next year my work PC and next year a new home PC). So TT was asking me questions I don't see now.

It asked me what my federal refund was for income purposes the previous year. I had to look this up from 2002-2005... so I am assuming it's real.

But I only know what TT asks me that I need to know (if that makes any sense). I am NOT a tax expert.

[timetosave]

Originally Posted by jIM_Ohio

Feel free to use ignorance as an excuse... but sounds to me like the same discipline you lacked to put you into this situation is the same discipline you need to get you out. Some follow through will teach you what you need to know going forward.

Why do you get 7k back? Who did your taxes? They should be able to help you with this. Accountant, Husband or computer program all could take care of this.

No dear, I will use ignorance as a reason to let someone who knows what they are doing do this...instead of totally messing it up by myself and owing in the end. As far as discipline is concerned...I HAVE NONE that is why I'm where I am...but I am working towards that end...again, it is not going to happen overnight. I'm glad you are so perfect and everything in your life is bright and pretty...not so for me. Do you feel better?

Like I stated I will contact payroll to see if they can help.

[kv968]

Originally Posted by jIM_Ohio

It asked me what my federal refund was for income purposes the previous year. I had to look this up from 2002-2005... so I am assuming it's real.

If I remember correctly, Turbo Tax asked me for my previous year's return also but I think it was just for identification purposes. At least that's what I hope it was for

[es59]

Your federal refund does not count as income on your next years' federal return. However, some states allow a deduction on state income taxes for the federal tax withheld that year. So, if you had previously deducted the federal taxes on your state return, you have to count any federal tax refund as "income" on your state return the next year.

For example, let's say I had $5,000 of federal tax withheld from my paychecks in 2005. I counted that $5,000 as a deduction on my state income tax return for 2005. If for 2005 I ended up getting a $1000 federal refund, I would have to count that as income on my state return for 2006, since I had taken too much of a deduction the prior year.

I believe the same holds true for state income tax refunds counting as income on federal returns if you deduct state income tax paid as an itemized deduction. But don't quote me on that..