Calculating W-4

[chiefsfan1]

Since it is tax time I am taking a look at our W-4's. I get so confused how to figure this out. We both work. Currently I have both W-4's at Married and 0 allowances. No kids.

There is the IRS calculator but never sat down to see. Guess I need too. Trying to get close to even.

Or I maybe way overthinking things. LOL

 

[slacktide_bitog]

Just keep it zero, unless the employer doesn't let you do that, then put 1.

 

[JayhawkRoy]

Wait until you know what your tax bill is for 2015, based on last year's known witholding rate. What I do is change my witholding in real dollar amounts to match my tax bill for that year. I found the IRS tax tables to be very, very off, based on being married and having no other family members as deductions. My wife worked and we had a near equal income, so I adjusted for the taxes each year and left the wife at Married and zero.

I am not a believer in large tax refunds so this method always got me close.

 

[raytseng]

You really only need to calculate it once.

Then you use last year and "adjust" your w4 to make sure your return comes out near zero.

If you have no idea just put 1. As long as you're paying more taxes than last year and you won't be penalized for underpayment.
The underpayment penalty isn't that bad anyway so it's not the end of the world if you've underpaid (just don't spend away money that you owe)

 

[gathermewool]

Originally Posted By: slacktide_bitog
Just keep it zero, unless the employer doesn't let you do that, then put 1.


I don't understand how an employer would have any say in how many exceptions you claim.

I claim as many exceptions as I am allowed. I'd much rather have the gov'ment give me a free loan than the other way around.

 

[Kuato]

Originally Posted By: gathermewool
...

I claim as many exceptions as I am allowed. I'd much rather have the gov'ment give me a free loan than the other way around.



Depends on your philosophy....gathermewool prefers to have money during the year and pay tax at the end.

Others who put 0 like maximum taxes taken out so they get a big refund (essentially letting the gov't use the money for the year)

And everything in between, including those that try to have the exact amount taken out so as to remain neutral at tax time.


What's your strategy, chiefsfan1?

 

[chiefsfan1]

Originally Posted By: Kuato
Originally Posted By: gathermewool
...

I claim as many exceptions as I am allowed. I'd much rather have the gov'ment give me a free loan than the other way around.



Depends on your philosophy....gathermewool prefers to have money during the year and pay tax at the end.

Others who put 0 like maximum taxes taken out so they get a big refund (essentially letting the gov't use the money for the year)

And everything in between, including those that try to have the exact amount taken out so as to remain neutral at tax time.


What's your strategy, chiefsfan1?


Trying to get to owe nothing or get any back.Maybe impossible.

 

[Pop_Rivit]

Originally Posted By: chiefsfan1
Trying to get to owe nothing or get any back.Maybe impossible.


It's not impossible, but it's hard to do. A better strategy is to target owing as little as possible, and then putting money away during the year to pay the tax when it is due. Invested well, and you'll have the interest in your favor.

 

[eljefino]

When the economy goes sour it can take a long time to get your refund. I dumped megabucks in my IRA during the last recession; there was a tax incentive to do so. Had a $900 refund coming my way and I didn't get it until December, almost one full year!

My first summer job had a touch of withholding and the state owed me ~$22. They passed a law saying it was too much bother to issue refunds under $25, so tough noogies. If I owed $22 you bet they'd want that.

Rig it so you owe a bit at the end. Typically being honest will get you there.

 

[Alfred_B]

I prefer to have as much as possible withheld during the year and receive a large sum for the overpayment. Then that goes into a savings account.

With underpayments, there is a risk of penalty if at the end of the year you owe more than a certain amount (I think it's $1,000) so I avoid that risk, too.

As for the "free loan to the government", with 0% interest, it doesn't really matter.

 

[eljefino]

Originally Posted By: Alfred_B

With underpayments, there is a risk of penalty if at the end of the year you owe more than a certain amount (I think it's $1,000) so I avoid that risk, too.


Wife & I owed $1200 one year and were exempt from the penalty because one of us got a big raise or yadda, yadda. You have to try to qualify for the penalty, which is what, 3% interest? I wouldn't be afraid of it, and if you are, adjust your W4 in November temporarily to have an extra $100 taken out of every paycheck.

This could be a good avenue if a spouse is self employed etc.

 

[Alfred_B]

I came within $20 of the penalty one year due to aggressive withholding management. Since then I treat the extra withholding as a 0% interest annuity.

 

[Kuato]

Originally Posted By: chiefsfan1
Originally Posted By: Kuato
Originally Posted By: gathermewool
...

I claim as many exceptions as I am allowed. I'd much rather have the gov'ment give me a free loan than the other way around.



Depends on your philosophy....gathermewool prefers to have money during the year and pay tax at the end.

Others who put 0 like maximum taxes taken out so they get a big refund (essentially letting the gov't use the money for the year)

And everything in between, including those that try to have the exact amount taken out so as to remain neutral at tax time.


What's your strategy, chiefsfan1?


Trying to get to owe nothing or get any back.Maybe impossible.


Also easy. Try "0" for deductions. If you still owe, then fill out the section allowing them to take an additional amount each pay period....pro rate what you paid over the year and it should get you where you want.

 

[ZeeOSix]

Originally Posted By: chiefsfan1
There is the IRS calculator but never sat down to see. Guess I need too. Trying to get close to even.


Use the IRS worksheet to get the best estimate of withholding.