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W4 withholding questions. Need help.

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  • W4 withholding questions. Need help.

    Can anyone here help me out. I was wondering if there is a general rule of thumb out there to follow when filling out W4s. Specifically for high income couples where one partner earns significantly more than the other? The thing is I just got married this year and we plan on filing jointly for the first time at the end of this year. Her earned gross income by the end of the year will be about 85-95k while mine will be 250-260k. Currently she claims single with no allowances on her W4 and I claim married filing jointly with 1 allowance on my W4. We will probably have around 27k to deduct from our 401k contributions combined by the end of this year. We have no other significant tax deductions otherwise. No mortgage payments as we rent, no children currently, and nothing else that I can think at the moment at least. When we filed our taxes last year our advisor told us to claim single and no allowances on both our W4s once were married for this year. Is this good advice or was he just being overly cautious about our withholdings to ensure we don't have a huge tax bill at the end of the year? The thing is I would rather have more in my paychecks throughout the year rather than give the government an interest free loan (i.e. I'd rather owe $0 or close to it rather than get a refund by the end of tax year). If anyone can help it would be greatly appreciated. And btw, I tried the IRS W4 withholding calculator already but I am not sure how accurate it actually is.

  • #2
    I find the IRS's calculator to be useful.

    Figure out how much you've paid YTD. Now figure your total tax bill for the year. Then figure out how much you need to pay the rest of the year, and how many exemptions that is (prob zero with add'l withheld).

    Looking at your income, you'll probably have to file single and zero exemptions and have an additional amount on top. I have to withhold an additional $500/mo on our paychecks to get us to our effective rate of 19%.

    Also you may be at AMT at that income, so your effective rate will probably be around the mid-20s, so beware of that.

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    • #3
      The IRS has a worksheet on the back of the W4, too. With the differences in incomes, you'll likely have to withhold additional money for taxes.

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      • #4
        In addition to the IRS worksheet and calculator, I fire up TurboTax. Then I can test out various scenarios, and see the implications. This helps if you want to factor in a kiddo, or mortgage insurance, or any other above/below the line scenario.

        You can also re check in Dec 30th, and if you are behind for whatever reason, you can send in a check so you don't hit the penalty for failing to pay enough.

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        • #5
          The W4 withholding form is not meant to substitute for a real tax projection. It works ok for lower income couples with similar pay or a couple with only 1 income, but not for your situation. If your tax advisor is not doing intra-year projections (which would be especially helpful for you), then s/he probably gave you good advice.

          After this year, it will be easier to determine what you should be withholding. For 2017, though, I would be a lot less interested that the paltry amount of interest-free income you are giving up than the opposite, which is having to scramble for a few thousand dollars next April 15.

          And let's be honest - would you really save the extra $ you get in your paycheck or might it folded into monthly spending? For most, it's the latter.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            ...people still use paper worksheets? I was talking about their online calculator.

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            • #7
              I just ticked "Married but withhold at higher single rate" with zero exemptions, and I'll see how it goes.

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              • #8




                In addition to the IRS worksheet and calculator, I fire up TurboTax. Then I can test out various scenarios, and see the implications. This helps if you want to factor in a kiddo, or mortgage insurance, or any other above/below the line scenario.

                You can also re check in Dec 30th, and if you are behind for whatever reason, you can send in a check so you don’t hit the penalty for failing to pay enough.
                Click to expand...


                Does TurboTax make a recommendation to adjust your W4 withholdings if you don't fall under safe harbor?

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