w4 deductions for married 2-earner family

[bballfreakunc]

I've been reading this blog religiously for the past month and with the new year, I wanted to gather recommendations/thoughts on how to update my DW and my w4 deductions. We just got married in October so we've both kept our w4 deductions for 2014 at 2 (line A and B both =1) on the federal form. Below are some expected details for 2015 and we'll be married filling jointly.

Wages:
Job 1: 85k
Job 2: 58k
Job 1 Bonus: ~7-8k (max 10% if I and company both reach our goals)
P/T (planned) Extra income: ~3k (refereeing sports, consulting gigs, etc...obviously difficult to nail down)
Investment Dividends and Interest (taxable accounts): ~3k
K-1 from partnership: no idea what that's going to look like

Tax Deferred Plans:
Job 1 401k contributions: 18k
Job 2 Simple IRA contributions: 12k

Other:
No dependents
Might buy a house or investment property in 2015

Obviously, we want to minimize our refund for tax year 2015 (actually better if we owe a little).
1) Any secrets on how to set up w4's so we can meet our goal? Do we both stay at 2 deductions on our w4's?
2) Will buying a house / investment property affect the deductions (i.e. if we itemize deductions due to mortgage interest, will we owe less tax and therefore our w4 deductions will be off)? If we buy an investment property and start collecting rent, does that throw off our deductions?
3) If the P/T income were to increase dramatically to say 15k (i'm very optimistic), would that severely screw up our deductions?

Sorry for the barrage of questions, but any help would be greatly appreciated.

[Catbert]

Once you do your 2014 taxes you'll have a better idea of how much you need deducted for 2015.  I always claimed "married w/zero" and then added a dollar amount per pay period so that I would end up paying as much as I owed the previous year.  Adjusting the dollar amount always seemed easier to me than the calculators.

If you have another substantial change in 2015 (e.g., buy a house early in the year) you can always play with TurboTax (or other program) to see the impact and adjust the dollar amount withheld as necessary.

[Proud Foot]

To try to answer your questions:

1)My wife and I both work but have a difference in our wages similar to yours. I always use the "two earners/multiple jobs" worksheet on the second page of the W-4 to help me get a starting place. And then I always revisit it each year after filing the previous year's taxes and then I create a projected income return in early July based upon our mid-year paycheck totals (mine is semi-monthly, dw's is bi-weekly) and adjust either up or down from there. I do this because the year we got married and the first full year being married I put too much trust in the W-4 to withhold the correct amount and owed around $800 each year (combined fed & state). The withholding tables work great if you are taking the standard deduction, have nothing additional as far as credits go, and both have similar wages.

2 & 3) Anytime you have any income which does not already have taxes withheld will mess up your deductions. You would want to increase the amount you have withheld from your jobs to cover the taxes related to rental income or P/T income or you would end up owing more than you want when you file your return as well as possibly face penalties.

When is your bonus paid and would your company allow you to use a different withholding rate for the bonus? If you can and the bonus is paid in December I would withhold throughout the year based upon what you know and then project your total tax right before the bonus (since you will know any increase in P/T Income or rental income) and make sure you have enough withheld from the bonus to keep you from having a big tax liability when you file.

[bballfreakunc]

Thanks mary and Proudfoot for your thoughts. I think it's going to be a while before I do my 2014 taxes as I believe the Accountant doing taxes for my partnership (joined Feb of last year) gets the K-1s out around April, but once I do my 2014 taxes, I should be able to adjust our 2015 withholdings appropriately.

Proudfoot, my bonus is paid roughly in Feb and August and it's taxed at the marginal rate. So it sounds like it might be best for my DW and I to keep what we have and then revisit in April and adjust our deductions appropriately and maybe one last time in November/December to adjust for P/T and rental income wages if any.

Does the IRS get mad if you pay all your taxes in the later half of the year? I.e. if my P/T income was 15k and I fixed my deductions in December so almost all of my income from Job 1 in December went to the IRS, would they get pissed that I didn't do it uniformly throughout the year? Kind of a backend tax payments?

[MDM]

Does the IRS get mad if you pay all your taxes in the later half of the year? I.e. if my P/T income was 15k and I fixed my deductions in December so almost all of my income from Job 1 in December went to the IRS, would they get pissed that I didn't do it uniformly throughout the year? Kind of a backend tax payments?

Depends on the definition of "pay".  If you make estimated tax payments, those do have to be done timely (quarterly) or the IRS will penalize you.  Withholding, on the other hand, is treated as timely no matter when it was actually withheld.

See also http://forum.mrmoneymustache.com/welcome-to-the-forum/how-many-allowances-should-i-be-claiming-on-my-w-4-to-maximize-my-cash-flow/ and http://forum.mrmoneymustache.com/ask-a-mustachian/taxes-exemption-questions/ for similar discussions.

Have you tried http://www.irs.gov/Individuals/IRS-Withholding-Calculator?