Author Topic: W4s, allowances, and taxes?  (Read 5809 times)

Psychstache

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W4s, allowances, and taxes?
« on: February 21, 2013, 07:02:01 PM »
Hey guys,

I was filling out a new W4 to try and finagle things so i dont get another massive refund next year.

I asked the payroll person if I could just give them an amount to withhold, but she said it doesnt work that way. You can enter a number of exemptions and also ask them to withhold any extra amount.

My question is: Could I just claim like 40 so they withhold nothing and then ask them to withhold $X extra, X being my expected tax burden/12? Is this gonna cause problem? anyone else do something weird like this?

Thanks!

Zaga

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Re: W4s, allowances, and taxes?
« Reply #1 on: February 21, 2013, 07:22:39 PM »
I've considered that, but instead have decided to just check things halfway through the year by filling out a mock tax return to see about where we are and adjusting from there.  It's not perfect since I generally use the previous year's tax form, but it gets me in the right ballpark.

Nords

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Re: W4s, allowances, and taxes?
« Reply #2 on: February 21, 2013, 07:30:22 PM »
My question is: Could I just claim like 40 so they withhold nothing and then ask them to withhold $X extra, X being my expected tax burden/12? Is this gonna cause problem? anyone else do something weird like this?
During our working years, we routinely claimed extra exemptions to reduce our withholding.

The caveat is that you still have to pay enough tax each quarter (either via withholding or sending in estimated payments) to meet the minimum requirements.  The next estimated tax payment (for tax year 2013) is due around 15 April.  Your state and your local taxes may have similar requirements.

http://www.irs.gov/pub/irs-pdf/fw4.pdf

http://www.irs.gov/pub/irs-pdf/p505.pdf  (start with the estimated taxes flowchart on page 26)

TN_Steve

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Re: W4s, allowances, and taxes?
« Reply #3 on: February 21, 2013, 09:27:07 PM »
Ksaleh, I agree with Nords, and that is what my wife and I still do; hate getting a refund, even in the present interest rate environment.  Just be careful to hit the safeharbors (100% of prior years tax obligation or 90% of present years for most people with close to typical pay/income)  We typically end up jiggering our withholding amounts several times each year so as to get as close as possible to the minimum allowable amount paid.

Also, note that  if there are 14 exemptions or more claimed, a report must be made to the IRS by employer.   Some states/cities are even pickier.  NYC requires its employees to file a "Withholding Certificate Affirmation" if claiming more than 10 federal allowances.  http://www.nyc.gov/html/opa/html/taxes/withholding.shtml#unsigned  Still, as long as you pay the amount for which you are obligated via the lump sum addon each paycheck, the reporting requirement shouldn't harm you.

On a bit of a tangent, although he generally knows a lot more than me in the retirement realm, I think Nords might be making a little bit of an overstatement on one point:

[SNIP] . . .

The caveat is that you still have to pay enough tax each quarter (either via withholding or sending in estimated payments) to meet the minimum requirements.  The next estimated tax payment (for tax year 2013) is due around 15 April.  Your state and your local taxes may have similar requirements.

[emphasis mine, and SNIP] ***


My understanding has always been that as long as you can meet the safeharbor amounts via paycheck withholding, the quarterly requirements are not applicable.  (We've had a couple of $100 net income months in past Decembers, in fact, to fix underwithholding on bonus payouts.)  I don't see it in Pub 505, but found one CFP/CPA agreeing with me on his site:  "You can compensate for earlier underpayments during the current year by adjusting your withholdings for the last few months of the year. The IRS considers withheld payroll taxes as being paid equally throughout the year, in spite of when actually withheld."   http://www.karlblovet.com/tax-penalties.htm  Probably getting pretty far into the trivia weeds, as most folks would rather not have $100 pay check months, but . . .  :-)


jeepbraah

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Re: W4s, allowances, and taxes?
« Reply #4 on: February 22, 2013, 07:34:12 AM »
How many exemptions did you claim last year? Why not simply claim 0-1 this year?

Zaga

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Re: W4s, allowances, and taxes?
« Reply #5 on: February 22, 2013, 08:47:34 AM »
How many exemptions did you claim last year? Why not simply claim 0-1 this year?
Claiming fewer exemptions will get MORE withheld from their checks, resulting in a larger refund.  That's what they are trying to avoid.

jeepbraah

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Re: W4s, allowances, and taxes?
« Reply #6 on: February 22, 2013, 09:45:47 AM »
How many exemptions did you claim last year? Why not simply claim 0-1 this year?
Claiming fewer exemptions will get MORE withheld from their checks, resulting in a larger refund.  That's what they are trying to avoid.

Ah was thinking they wanted the opposite.

Fuyu

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Re: W4s, allowances, and taxes?
« Reply #7 on: February 22, 2013, 10:59:54 AM »
Does using the number calculated from here still give you a huge federal refund?

http://www.irs.gov/Individuals/IRS-Withholding-Calculator

Catbert

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Re: W4s, allowances, and taxes?
« Reply #8 on: February 22, 2013, 01:39:09 PM »

Once you figure out how much you want then to take out, it's pretty easy.  When I worked I claimed "single with zero" (I was married) and then had them take out however much additional I needed.  Once a year (after I did the previous year's taxes) I adjusted the amount to the new year.

While payroll won't "just" take out a specific $ amount they will take out an "additional" specific amount above your withholding.

anastrophe

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Re: W4s, allowances, and taxes?
« Reply #9 on: February 22, 2013, 01:44:10 PM »
When I had that problem I would wait until the fourth quarter, check the withholding calculator Fuyu posted and then just adjust my withholding for the end of the year. Simple and worked just fine.

smalllife

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Re: W4s, allowances, and taxes?
« Reply #10 on: February 22, 2013, 04:03:44 PM »
It actually can work that way - where you just take out a certain dollar amount.  It isn't common, but there is no reason why your payroll administrator should be unable to accommodate your request.