Author Topic: Tax Law withholding change - what's your estimated amount?  (Read 2890 times)

Sibley

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Tax Law withholding change - what's your estimated amount?
« on: January 26, 2018, 11:39:08 AM »
I had the IRS notice on the new withhold tables delivered to me by my payroll department (thank you, all company email group!). I was curious and did the math. I'm expecting to get about $30 more per month in my take home pay. Single withholding.

https://www.irs.gov/pub/irs-pdf/n1036.pdf

Curious - what is everyone else expecting?

newgirl

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #1 on: January 26, 2018, 11:48:04 AM »
I'm not expecting any real change. Assuming I did my math right I'll be getting about $4 more per paycheck.

MDM

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #2 on: January 26, 2018, 11:49:04 AM »
As one might guess, the tax and withholding calculations in the case study spreadsheet match our situation well. ;)

Too many differences between 2017 and 2018 for apples to apples, but within the estimated accuracy of year-end index fund distributions (and barring any major life events) we know what to expect for 2018.

BrightFIRE

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #3 on: January 26, 2018, 02:01:51 PM »
Thanks for the explanation of mine and my SO's ~$30 paycheck increases this week. I had been to the IRS withholding calculator page and they hadn't updated yet, so it didn't occur to me that they had updated businesses before individuals. Mystery solved!

ETBen

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #4 on: January 26, 2018, 07:57:02 PM »
Thanks for the explanation of mine and my SO's ~$30 paycheck increases this week. I had been to the IRS withholding calculator page and they hadn't updated yet, so it didn't occur to me that they had updated businesses before individuals. Mystery solved!

Mine too!  Except I didnít realize it until I read your post. I havenít seen my pay statement yet, just the deposit in my account. And I was pretty sure I didnít have $150 in expense reports due to me.

ChpBstrd

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #5 on: January 26, 2018, 08:34:19 PM »
$15 twice a month.

I wonder what the Greeks did with their extra tax money in the mid-2000's, before their debt crisis / austerity set in?

obstinate

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #6 on: January 27, 2018, 08:14:03 AM »
I already have to pay estimated taxes, so I'm just going to go that route.

Sibley

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #7 on: January 27, 2018, 05:55:09 PM »
Well, since a few people were surprised - actually take a look at what's being withheld and make sure it makes sense for your situation. Due to the way that the conversion is happening, there's some risk that something could be out of wack. You don't want a surprise in April 2019.

teen persuasion

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #8 on: January 28, 2018, 02:07:21 PM »
Zero change expected.

We set our withholdings numbers high enough years ago to have nothing withheld for federal, because we have a bunch of refundable credits.  Unfortunately, we can't get state to zero, they object to claiming that many exemptions (which are worth less than federal exemptions were).

MDM

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #9 on: January 28, 2018, 02:22:46 PM »
Unfortunately, we can't get state to zero, they object to claiming that many exemptions (which are worth less than federal exemptions were).
Does state law prevent claiming that many, or does a different phrase better describe the situation?

JLee

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #10 on: January 28, 2018, 04:10:56 PM »
Payroll's automatic adjustment was about $130/mo.

zeli2033

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #11 on: January 28, 2018, 04:46:28 PM »
Assuming my math isn't wrong, I'm expecting to see ~$45 more semi-monthly at single rate withholding.

teen persuasion

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #12 on: January 29, 2018, 07:57:10 PM »
Unfortunately, we can't get state to zero, they object to claiming that many exemptions (which are worth less than federal exemptions were).
Does state law prevent claiming that many, or does a different phrase better describe the situation?
Hmm, not sure of the exact wording of state law on the subject, but 15 exemptions is the point at which you've simply gone too far.  It's a long time since I originally researched this, so I'm fuzzy on precisely how they put it (absolutely cannot claim 15 or greater, or more of a massively ridiculous level of state scrutiny if attempting to claim 15 or greater).  I do remember calculating that I'd need 25 to reach zero withholding at that time.  Now I've got DH's state withholding to zero, since we've ramped up to max HSA, and max 401k + some catchup contributions, as these come out before tax withholding is figured.  I have no option for either of those, and my part time work has bumped up enough to begin creeping above the zero withholding level with 10 exemptions.  I'll just need to go all the way to 14.

 First world problems.  It's just stupid to have refundable credits, and arbitrary limits to adjusting for them effectively.  It's obviously possible to consistently be eligible for refundable credits exceeding tax liability, as we've used this strategy for years, first using the refunds to rapidly pay down our mortgage, and then later to fund Roth IRAs for both of us.  They are shrinking as the kids leave the nest, but there's still opportunity until DS5 is no longer our dependent.

teen persuasion

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #13 on: January 29, 2018, 08:25:16 PM »
Curiosity got to me, I looked it up.  There is an ominous threat of $500 fines and such for perjury, and a checkbox if you claim more than 14 exemptions.  If checked, your form must be sent to the state for scrutiny.

Per the algorithm, we'd be allowed to claim 13 at most when we had 5 kids as dependents.  The problem is that dependent exemptions are only worth $1k, not indexed for inflation.  You get 3 exemptions for claiming the state equivalent of CTC (33% match of fed CTC), but not per child!  Also get 3 exemptions for state equivalent of EITC (30% of federal) - wildly inaccurate as EITC could be $1 or $6xxx.

The form states that you may claim fewer exemptions, if you want more withheld.  The form does not state that you may claim more if needed.

So state law does not absolutely forbid 15+ exemptions, it just strongly discourages it.

MDM

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #14 on: January 29, 2018, 10:01:07 PM »
So state law does not absolutely forbid 15+ exemptions, it just strongly discourages it.

Question is whether the number of IT-2104 allowances is state law or not.  Requirement of withholding tax from wages includes
Quote
...withhold from such wages for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due....
That implies (using IANAL reasoning) that the law requires you get the correct withholding amount, not number of allowances.

See also Any way to avoid large state tax refund? - Bogleheads.org.  Up to you whether it is worthwhile pursuing....

newgirl

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #15 on: January 30, 2018, 08:41:02 AM »
I'm not expecting any real change. Assuming I did my math right I'll be getting about $4 more per paycheck.

Welp apparently I can't do IRS math at ALL because they just posted end of the month paystubs and based on the changes it looks like I'm taking home about $91/month more.

teen persuasion

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #16 on: January 30, 2018, 01:41:51 PM »
So state law does not absolutely forbid 15+ exemptions, it just strongly discourages it.

Question is whether the number of IT-2104 allowances is state law or not.  Requirement of withholding tax from wages includes
Quote
...withhold from such wages for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due....
That implies (using IANAL reasoning) that the law requires you get the correct withholding amount, not number of allowances.

See also Any way to avoid large state tax refund? - Bogleheads.org.  Up to you whether it is worthwhile pursuing....

Thanks for nudging me to look more closely.  Last year I had a total of $100 withheld by the state, not huge, but obviously a growing trend (more hours due to a co-worker's retirement).  Not sure why I set 10 exemptions for the state, instead of 14, but it wasn't an issue at a lower pay previously.  Bumping it to 14 should keep me in zero withholding at current pay/hours.  I'll change it when new Fed forms are out, assuming our CPA may have us redo them (not worth making extra work right now).

The BH thread was interesting, it shows that unusual payroll situations like large bonus checks are not handled well by the standard withholding system.  It occurs to me now that when DH was overwithheld it was because his teaching pay schedule was unusual: biweekly 21 * year (none over summer break).  So his paychecks were salary / 21, not / 26, but treated as biweekly.

jlcnuke

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #17 on: January 30, 2018, 02:16:46 PM »
I'm getting right at $40/week more now (adjusted last week for the first time)

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caracarn

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Re: Tax Law withholding change - what's your estimated amount?
« Reply #18 on: January 30, 2018, 02:22:37 PM »
Increased take home by $74.53/week for Married with 7 exemptions.