Federal Witholding Tax Question

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

I like the idea of getting a little money back from the government each spring.

Lately, the last 2 years since I haven't been employed, our Federal Refund has been in what I call the ridiculous range. We do not require the feds to play banker for us. We are capable of putting funds into a savings account on our own.

It is time to make a tax witholding change as an additional $400/month in the household is preferable to sending this money to the govt each pay period. I know that each individual case is different but is there a rule of thumb that we could loosely follow?

Our CPA wasn't very helpful with this. His answer was "play with it".

My DH gets paid bi-weekly. His current Fed Witholding is Single - 2. Would a change to Married - 3 result in $200 more take home each pay period? Or should the deduction be even higher to accomplish this?

I do realize that if I find employment in my field again that all bets are off.

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

Best bet is to go with what you are, if it's married with 3 dependents, use that. The withholding is gauged to fit with what your status and dependents are when there is only one employed. Should the status later change, take it into effect immediately so you don't fall into the underwithholding penalty area.

[garyd210 Senior Member Find all posts View Profile Close garyd210]

W-4 form instructions

I dealt with an issue of paying too much federal by $500/year and not paying enough for state by $100/year. I was able to get a withholding guide pamplet which was pretty good about hitting the target taxwise. That will all change when I retire this summer and I'll need to make quarterly payments. DH should be able to contact his Human Resources for applicable instruction booklets. Too bad the CPA couldn't offer some insight!
On the side, I used the online tax return program offered on the IRS.gov site for $12.95 and got both my returns automatically deposited in 3 and 7 days! Of course my return was very basic with no itemization. garyd210

[Dave M Senior Member Find all posts View Profile Close Dave M]

You can also claim additional withholding "allowances" to reduce your withholding, based on your expected itemized deductions. Calculate the additional amount (which includes allowances for dependents) on the "Deductions and Adjustments Worksheet", enter the number on line 5 of Form W-4, check the appropriate box in line 3, sign the form and give it to your payroll or H.R. department.

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

Not CPA, I know there are a lot of CPA here, so if they jump in listen to them.

I believe it all depends on how much you made, what itemize deduction you can use. So you do have to play with it. So I did play several times on the W4's deduction number. Just keep the pay stuff and put in one deduction more, and compare the new pay stuff. I did it for both my state and government.

However, I think at the time of paying tax, if your withhold amount is not equal or greater than last years you filed tax amount or not at 90% of the current tax year filed amount, you will subject to penalty, and if you hold stock or mutual funds, one simple dividen change, or a capital gain sale could hit you if you try too close since you are reducing the holding not add the holding. If you withhold too much, usually add one is good enough. If you really want to withhold as little as possible, make sure you keep watch all the dividents and pay IRS the difference before the end of withholding period (1/15?)

Jya-ning

[rklein01 Senior Member Find all posts View Profile Close rklein01]

On page 37 of the IRS withholding tables, or on the pages that follow, you can see the exact amount that will be withheld from your paycheck corresponding to the number of exemptions that you declare.

The goal for most people is to have the employer withhold a bit more than the tax you actually paid the previous year.

[lawren2 Malibu Beach Barbie & A Super Moderator Find all posts View Profile Close lawren2]

Thank you all for all the links to the IRS forms and tables. You would think the guy I pay every year to do my taxes would have given me this info.

I tried to do page 2 for itemized deductions of the W4 and it came up with Married 7. Scary AND I used accurate numbers from 2006's filing.

Although page 1 of the W4 says we should be filing Married - 5 we are going to use Married - 4 for now and see what happens. I'll probably leave it be for next year as well <if my employment status doesn't change> as DH's job probably won't get this done until end of March or April.

I had this down to a science when we were both working. I should have done this last year but was afraid that the very large tax return for 2005 was a fluke due to my severance package.

[Carol C Senior Member Find all posts View Profile Close Carol C]

Btw there's a small credit allowed this filing, to compensate folks for the Fed excise tax on phone bills which has been ruled unconstitutional for all those years. If you want me to post the full text on it here, just let me know. It amounts to only 30 or 40 bucks credit in most cases, unless you've kept your phone bills for years or decades, in which case you can get it all back.