Author Topic: Two Earners and filling out W4  (Read 579 times)

Gronnie

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Two Earners and filling out W4
« on: February 13, 2018, 10:40:35 PM »
I will make about $100k this year and wife about $80k. We have 1 child, a 7 month old daughter. I haven't done our taxes for last year yet, praying we don't owe a bunch.

If I do the "two earners multiple jobs" worksheet from 2017 (there isn't one out yet for 2018, what the hell IRS!!!), it says I should withhold an additional $270 per pay period.

Does that mean we each do Married 0 and one of us withholds an additional $270? Or do we do Married withhold at single rate 0 plus an additional $270? Something else like each of use Married 1 and one of us an additional $270?

The worksheet does not seem clear about this at all.
« Last Edit: February 13, 2018, 10:42:08 PM by Gronnie »

MDM

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Re: Two Earners and filling out W4
« Reply #1 on: February 14, 2018, 05:30:39 AM »
Don't know, but you could try the case study spreadsheet.  See the 'Instructions' tab for W-4 entries.

alanB

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Re: Two Earners and filling out W4
« Reply #2 on: February 14, 2018, 09:44:39 AM »
My wife make a little more than I do, but I withhold more from my paycheck.  If you are MFJ the IRS does not care about how much each person paid, only the net, as far as I know.  Every year I estimate how much fed taxes will be due and divide by 26 (for biweekly), then try to hit that amount net between the two of us per pay period. 

Just do Married 0 and adjust up to the right amount.  You can do trial and error or figure out how much they will withhold based on the IRS publication: https://www.irs.gov/pub/irs-pdf/n1036.pdf

Of course there is a second option, minimize your withholding then pay the remaining amount due next year.  As long as you can afford the payment when it is due... probably would only be a few thousand dollars.

MDM

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Re: Two Earners and filling out W4
« Reply #3 on: February 14, 2018, 10:09:11 AM »
Of course there is a second option, minimize your withholding then pay the remaining amount due next year.  As long as you can afford the payment when it is due... probably would only be a few thousand dollars.
...and don't mind paying the resulting interest penalty for under-withholding.

alanB

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Re: Two Earners and filling out W4
« Reply #4 on: February 14, 2018, 10:25:58 AM »
Of course there is a second option, minimize your withholding then pay the remaining amount due next year.  As long as you can afford the payment when it is due... probably would only be a few thousand dollars.
...and don't mind paying the resulting interest penalty for under-withholding.
Yes, sorry that is what I meant, pay the minimum to not get hit with the under-withholding penalty.  That was what my estimate was based on.

MDM

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Re: Two Earners and filling out W4
« Reply #5 on: February 14, 2018, 10:48:14 AM »
I will make about $100k this year and wife about $80k. We have 1 child, a 7 month old daughter.
Based on those numbers alone (no other income, no pre-tax deductions, not itemizing, etc.) you will owe ~$24.2K in 2018 federal tax.  Thus you should aim to have about that much withheld.

Assuming 12 months of withholding under the new rates, having both of you withhold as single with 3 allowances, or having the $80K earner use married with 0 while the $100K earner uses single with 1, would get you close.  See the link in the first reply if you want to try things for yourself.

Gronnie

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Re: Two Earners and filling out W4
« Reply #6 on: February 14, 2018, 03:58:16 PM »
Thanks for the replies everyone, just wanted to make sure we aren't drastically underwitholding.

Currently we have it set as the lower income earner Married 0 and the higher income earner Married 3 plus an extra $250 (26 pay periods).

My wife also just took a new job and I think her pay will be closer to 75,000 (or maybe even 70,000) this year. New job is a bit lower pay, plus no shift differential and much less OT. We also have some deductions for health insurance, contributing 5% to 401k (planning on increasing this soon, just paid off the last of our non-mortgage debt), and $5000 dependent care FSA -- so our tax liability should be a bit less than the $22,000 - $23,000 this calculator estimates.

I had 542.88 in Federal taxes taken out this last check, and DW had 203.12. Amortized across 26 paychecks each that ends up being $19.396. ~10-15% of my expected earn is bonus, so that will also have taxes withheld. Seems like we are pretty close. Anyone disagree?
« Last Edit: February 14, 2018, 04:07:30 PM by Gronnie »

alanB

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Re: Two Earners and filling out W4
« Reply #7 on: February 15, 2018, 06:54:23 AM »
Great job, those numbers look pretty good to me.  Congrats on paying off your debt!! 

Does "5% to 401k" apply to both you and your wife's income?  Here is an estimate, assuming that you do not have any other deductions or income...

Gross income: 175,000
401K: 5,000?
Insurance: 5,000?
FSA: 5,000
AGI: 160,000
Std deduction: 24,000
Taxable income: (AGI - std deduction) = 136,000
Tax = 19,799

If you want to change any of the numbers, for your bracket:
tax = (taxable income) x 0.22 - 8121 - (2000 x #kids)

Withholding: 19,396

I think they will withhold 22% on your bonus... maybe someone more knowledgeable can confirm.
If so: total withholding = 19,396 + (bonus x 0.22)

Gronnie

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Re: Two Earners and filling out W4
« Reply #8 on: February 15, 2018, 10:03:05 AM »
Yes, 5% each to 401k.

I am also maxing out an individual HSA to the tune of ~2800 of my contributions with employer contributing the remainder (we each have insurance through our own employer, she carries the insurance for our daughter).

I think we're pretty close and keep a big enough buffer that if we have to pay in a couple thousand that would be fine.