Author Topic: Running the Numbers for Witholding  (Read 2576 times)

Pooperman

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Running the Numbers for Witholding
« on: October 03, 2014, 03:10:38 PM »
I'm not a CPA and I don't know all the minor hitches or things I'm missing calculating out what my tax bill should be. Using 2014 numbers for everything, I calculated what my tax bill would be if I got the maximum deductions possible to see if I'd still have enough left over to live on + emergencies. Important bits of information: I live in NJ, work in NYC. Yearly earnings 60k. Max tax-advantaged investments: $26,300.

Income left after investments: $33,700, from which taxes will be taken out.
FICA taxes on $56,700 (reduced from HSA): $4,338.
$33,700 - standard deduction ($6,200... maybe head of household?) - 2 exemptions ($7,900) = $19,600
Fed taxes on $19,600: $2,486 (or $103.60 per paycheck)
NY taxes on $19,600: $999 (or $41.63 per paycheck)
Total taxes: $7823

$33,700 - $7823 = $25877 leftover. Need ~$27000/yr, however, this calculation ignores untaxable SSI of 534/mo * 12 = $6408.
$25877 + $6408 - $27000 = $5285 ($440/mo surplus).

As NY tax rates are higher, I should not have to pay anything in taxes in NJ. As I don't live in NYC, I shouldn't have to pay NYC taxes either (I think). If I'm missing anything, forgetting anything, etc, let me know! I want to be able to run the calculation come Jan 1 to get my withholdings right.

That's the other thing. If I know exactly what I should be withholding down to the cent, how do I make it so that I get a check back for less than $10 (but not under so I have to pay anything)? How do I know how many exemptions + $ amount I should use in order to get it accurate. I've only recently come into MMM this year, so next year this would apply. This year, I could stop giving the gov't money and they'd still owe me.

RE: head of household. I am unsure if this would be what I am next year. Pitagirl (girlfriend) is on SSI, can't work. I will qualify for her as an exemption, but would I also be head of household since we are unmarried but she is my dependent?

MDM

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Re: Running the Numbers for Witholding
« Reply #1 on: October 03, 2014, 04:16:14 PM »
Others may comment on your tax filing status.  To calculate withholding, we have the following VB function in an Excel file.  It is based on a monthly, married-filing-jointly income.  The "salary" input to the function should be "gross salary minus [(number of exemptions) * (annual exemption /12)]" (the division by 12 is because this is a monthly withholding).

See http://www.irs.gov/pub/irs-pdf/p15.pdf for details (e.g., note the IRS rounds the 3950/12 to 329.20 instead of 329.17).

Nothing wrong with having to pay more to the IRS in April, as long as it is less than $1000 (or other "safe harbor" to avoid paying penalty & interest).

Code: [Select]
Function Fed_withhold(salary)
brkt_7 = 38838
brkt_6 = 34463
brkt_5 = 19608
brkt_4 = 13108
brkt_3 = 6854
brkt_2 = 2217
brkt_1 = 704
rate_7 = 0.396
rate_6 = 0.35
rate_5 = 0.33
rate_4 = 0.28
rate_3 = 0.25
rate_2 = 0.15
rate_1 = 0.1

base_1 = 0
base_2 = base_1 + ((brkt_2 - brkt_1) * rate_1)
base_3 = base_2 + ((brkt_3 - brkt_2) * rate_2)
base_4 = base_3 + ((brkt_4 - brkt_3) * rate_3)
base_5 = base_4 + ((brkt_5 - brkt_4) * rate_4)
base_6 = base_5 + ((brkt_6 - brkt_5) * rate_5)
base_7 = base_6 + ((brkt_7 - brkt_6) * rate_6)

    If salary > brkt_7 Then
      Fed_withhold = Round(rate_7 * (salary - brkt_7) + base_7, 2)
    ElseIf salary > brkt_6 Then
      Fed_withhold = Round(rate_6 * (salary - brkt_6) + base_6, 2)
    ElseIf salary > brkt_5 Then
      Fed_withhold = Round(rate_5 * (salary - brkt_5) + base_5, 2)
    ElseIf salary > brkt_4 Then
      Fed_withhold = Round(rate_4 * (salary - brkt_4) + base_4, 2)
    ElseIf salary > brkt_3 Then
      Fed_withhold = Round(rate_3 * (salary - brkt_3) + base_3, 2)
    ElseIf salary > brkt_2 Then
      Fed_withhold = Round(rate_2 * (salary - brkt_2) + base_2, 2)
    ElseIf salary > brkt_1 Then
      Fed_withhold = Round(rate_1 * (salary - brkt_1) + base_1, 2)
    Else
      Fed_withhold = 0
    End If
End Function

secondcor521

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Re: Running the Numbers for Witholding
« Reply #2 on: October 03, 2014, 04:38:09 PM »
I don't believe you can use a non-relative to qualify for HOH filing status.  Check the IRS publications to be sure, though.

Pooperman

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Re: Running the Numbers for Witholding
« Reply #3 on: October 03, 2014, 05:38:21 PM »
Others may comment on your tax filing status.  To calculate withholding, we have the following VB function in an Excel file.  It is based on a monthly, married-filing-jointly income.  The "salary" input to the function should be "gross salary minus [(number of exemptions) * (annual exemption /12)]" (the division by 12 is because this is a monthly withholding).

See http://www.irs.gov/pub/irs-pdf/p15.pdf for details (e.g., note the IRS rounds the 3950/12 to 329.20 instead of 329.17).

Nothing wrong with having to pay more to the IRS in April, as long as it is less than $1000 (or other "safe harbor" to avoid paying penalty & interest).

Code: [Select]
Function Fed_withhold(salary)
brkt_7 = 38838
brkt_6 = 34463
brkt_5 = 19608
brkt_4 = 13108
brkt_3 = 6854
brkt_2 = 2217
brkt_1 = 704
rate_7 = 0.396
rate_6 = 0.35
rate_5 = 0.33
rate_4 = 0.28
rate_3 = 0.25
rate_2 = 0.15
rate_1 = 0.1

base_1 = 0
base_2 = base_1 + ((brkt_2 - brkt_1) * rate_1)
base_3 = base_2 + ((brkt_3 - brkt_2) * rate_2)
base_4 = base_3 + ((brkt_4 - brkt_3) * rate_3)
base_5 = base_4 + ((brkt_5 - brkt_4) * rate_4)
base_6 = base_5 + ((brkt_6 - brkt_5) * rate_5)
base_7 = base_6 + ((brkt_7 - brkt_6) * rate_6)

    If salary > brkt_7 Then
      Fed_withhold = Round(rate_7 * (salary - brkt_7) + base_7, 2)
    ElseIf salary > brkt_6 Then
      Fed_withhold = Round(rate_6 * (salary - brkt_6) + base_6, 2)
    ElseIf salary > brkt_5 Then
      Fed_withhold = Round(rate_5 * (salary - brkt_5) + base_5, 2)
    ElseIf salary > brkt_4 Then
      Fed_withhold = Round(rate_4 * (salary - brkt_4) + base_4, 2)
    ElseIf salary > brkt_3 Then
      Fed_withhold = Round(rate_3 * (salary - brkt_3) + base_3, 2)
    ElseIf salary > brkt_2 Then
      Fed_withhold = Round(rate_2 * (salary - brkt_2) + base_2, 2)
    ElseIf salary > brkt_1 Then
      Fed_withhold = Round(rate_1 * (salary - brkt_1) + base_1, 2)
    Else
      Fed_withhold = 0
    End If
End Function

Thanks MDM. Just trying to make sure the way I am doing this is right. I should probably pay someone to do this, but I want to know how so I can in the future until it ends up too complicated/time consuming (dividends as income in one state, income from job in another, etc).