Question about tax witholding

[riverwed070707]

I just tried the IRS withholding calc. I currently claim 5, DH claims 1 (he works very PT). The calc says I should be claiming 11...is this insane? We have 1 dependent. I'm scared if I up it that much that we're going to end up owing. We did get a pretty big refund this year but still, 11?!

[creditcardfree]

It is possible, but not insane. If it helps, we claim 9, with two dependents. DH works, I do not. Taxable income of about $67K. We deduct property tax, state income tax, donations and mortgage interest usually to the tune of $13K. In 2009, we broke even with the withholding. We only received a $400 refund and that was due to the Making Work Pay Credit. Our tax situation was different in 2010, otherwise I'd give those numbers, but the ones above are pretty close.

You could definitely increase to 9 or 10 and know that you are not over withholding by as much as you are now. If it works out for this year, check the withholding calculator again after you file in February and adjust again if necessary.

[BuckyBadger]

Did anything change between last year and this? We had a big tax bill for 2010 because it was the first full year that I had been employed out of graduate school. Rather than mess around with our withholding number, we just took the amount we owed, divided it by 26 pay periods, and had that amount extra withheld. I think that this is an option for everyone on their W-4 Withholding Allowance document.

Because we are both still employed at the same places and make about what we did last year, we expect to be much closer to coming out even at tax time.

Would this work for you rather than messing around with your number.

(We personally claim 1 federal and 2 state, by the way.)

[JoshuaHeckathorn]

I would recommend just withholding what you paid in taxes last year. You don't want to pay the IRS any more than you have to up front. And even if you do end up owing some money when your tax bill is due, what's wrong with that? You won't be charged any penalty, and at least the cash has been in your pocket all along instead of Uncle Sam's.

[Slug]

Originally Posted by JoshuaHeckathorn

I would recommend just withholding what you paid in taxes last year. You don't want to pay the IRS any more than you have to up front. And even if you do end up owing some money when your tax bill is due, what's wrong with that? You won't be charged any penalty, and at least the cash has been in your pocket all along instead of Uncle Sam's.

Yes, do that and claim 99 allowances. IRS W-4 Income Tax Withholding Optimization | Sunk Costs Are Irrelevant

[MonkeyMama]

Originally Posted by JoshuaHeckathorn

I would recommend just withholding what you paid in taxes last year. You don't want to pay the IRS any more than you have to up front. And even if you do end up owing some money when your tax bill is due, what's wrong with that? You won't be charged any penalty, and at least the cash has been in your pocket all along instead of Uncle Sam's.

Agree - aim to pay as much as last year's tax.

There is nothing insane about 11. Especially if you do have a child.

I think we claim something like 12 - with 2 kids. For breakeven.

I actually would just claim 9 or 10. Why? Because year is half over. Change it and see how much tax is coming out. Take tax withholding per check and times it by 12, 24, or 26, depending how often you get paid. See how it compares to last years' total taxes. If it doesn't seem to be enough tax withholding, just tweak it again in January. For this year, likely won't matter since you over-paid the first 6 months already. (I'd always aim a little lower just to be safe - why I recommend 9 or 10. Most people do not like to owe and aren't prepared to owe).

[riverwed070707]

Originally Posted by BuckyBadger

Did anything change between last year and this? We had a big tax bill for 2010 because it was the first full year that I had been employed out of graduate school. Rather than mess around with our withholding number, we just took the amount we owed, divided it by 26 pay periods, and had that amount extra withheld. I think that this is an option for everyone on their W-4 Withholding Allowance document.

Because we are both still employed at the same places and make about what we did last year, we expect to be much closer to coming out even at tax time.

Would this work for you rather than messing around with your number.

(We personally claim 1 federal and 2 state, by the way.)

Our situation is not the same since last year. DH went back to school FT last August and is now only working 1 day a week so for our 2010 taxes we still had 8 months of his income whereas now he will only bring in around $10k for the year.

Originally Posted by JoshuaHeckathorn

I would recommend just withholding what you paid in taxes last year. You don't want to pay the IRS any more than you have to up front. And even if you do end up owing some money when your tax bill is due, what's wrong with that? You won't be charged any penalty, and at least the cash has been in your pocket all along instead of Uncle Sam's.

In that case, is it even worth withholding anything if we can just pay our bill from our savings? It estimated our tax bill to be something ridiculous like $200... Last year it was $1,500 which we have on hand at any given time.

[MonkeyMama]

Originally Posted by riverwed070707

In that case, is it even worth withholding anything if we can just pay our bill from our savings? It estimated our tax bill to be something ridiculous like $200... Last year it was $1,500 which we have on hand at any given time.

You are required to do some withholding, unless your total tax was $0 last year, and expected to be $0 this year. Unfortunately, you legally have to continue to withhold something.

I'd just claim 20 or something for the rest of the year. I presume you already had $200 withheld...

Re-evaluate January 1, of course.

[riverwed070707]

Originally Posted by MonkeyMama

You are required to do some withholding, unless your total tax was $0 last year, and expected to be $0 this year. Unfortunately, you legally have to continue to withhold something.

I'd just claim 20 or something for the rest of the year. I presume you already had $200 withheld...

Re-evaluate January 1, of course.

Good point. I have no idea why, but messing with tax withholdings makes me nervous

[jpg7n16]

Originally Posted by riverwed070707

I just tried the IRS withholding calc. I currently claim 5, DH claims 1 (he works very PT). The calc says I should be claiming 11...is this insane? We have 1 dependent. I'm scared if I up it that much that we're going to end up owing. We did get a pretty big refund this year but still, 11?!

Trust the force Luke!

If that's what the calculator said, then that's what I'd put it at.


If you wind up having too little taken out, you can console yourself with the fact that you've been given a free loan from the gov for a bit, that their now asking for back.


I've paid taxes the last 2 years come tax time. But it doesn't bother me one bit

[JoshuaHeckathorn]

Originally Posted by riverwed070707

Our situation is not the same since last year. DH went back to school FT last August and is now only working 1 day a week so for our 2010 taxes we still had 8 months of his income whereas now he will only bring in around $10k for the year.


In that case, is it even worth withholding anything if we can just pay our bill from our savings? It estimated our tax bill to be something ridiculous like $200... Last year it was $1,500 which we have on hand at any given time.

If your tax bill is estimated to be $200 because income has dropped, then only withhold $200. If you've already withheld that, claim the max on your W4 and try to limit the amount you withhold the rest of the year as much as possible.

[rvenom]

I don't really get this. I've been thinking about doing this for sometime now and I'm not sure what to do. I'm single but live with my fiance and we have no kids. I make 50k and never had any withholdings, but his time since we got engaged I need the cash now for planning and stuff for our future. I was going to try and add 5 pendents does anyone know if this is safe for me and my situation we also rent. I figured being its already near the end of the year it should really not affect me much. Well I know the refund will not be as large but I rather have the cash now.

[jpg7n16]

Originally Posted by rvenom

Well I know the refund will not be as large but I rather have the cash now.

The point is that you should always have the cash now. A refund means you paid too much in taxes - money you should have had the entire year.

Did you put in your information to the IRS calculator??

IRS Withholding Calculator

[rvenom]

I used a different calculator from paycheckcity.com and it worked out pretty good. HR dept from work told me to try that site, I'm going to try and add a few on my check like 5 and see how much of difference it makes then take it from there. I would like to figure out the max I can get with out having to pay any back and barely receiving anything in return. But how do I do that?

[Frugal]

It does sound like a lot of deductions. However, it could be possible.

[jpg7n16]

Originally Posted by rvenom

I would like to figure out the max I can get with out having to pay any back and barely receiving anything in return. But how do I do that?

You do that by using the IRS Withholdings calculator, and then completing a new W-4 and submitting that to your employer.


The form adjusts the taxes withheld from your paycheck so that your refund is essentially $0.

The calculator tells you what the put on the form.

[rvenom]

Originally Posted by Frugal

It does sound like a lot of deductions. However, it could be possible.

hmmmm... so you think 5 is too much

[SnoopyCool]

OP - something else to consider is that if your spouse is an undergrad paying for his education out of pocket, you could be eligible for education credits. This will affect your tax situation.

[riverwed070707]

Originally Posted by SnoopyCool

OP - something else to consider is that if your spouse is an undergrad paying for his education out of pocket, you could be eligible for education credits. This will affect your tax situation.

But since they aren't married, it won't affect his tax liability...just hers.

[jpg7n16]

Originally Posted by riverwed070707

But since they aren't married, it won't affect his tax liability...just hers.

OP = original poster

snoopy's comment was directed to the OP = original poster = you

Originally Posted by rvenom

hmmmm... so you think 5 is too much

If the OP's calculator told her to use 11, 5 is probably fine - but it could be too much, could be too little. You could however know the exact number to claim on your form if you'd just use the IRS calculator - which you don't seem to want to do.

It would solve your questions of 'what number should I claim?'; 'how do I avoid getting a refund?'; 'how do I make sure to get the most cash today from my paychecks?'; and 'is 5 deductions too many?'

Every one of those questions and concerns can be answered by using the calculator.