Early this year, I used the calculator on the IRS website to be able to fill out W-4's for my wife and I so that we would not get a large tax refund. Up until this year, we always had them filled out for married withhold at higher single rate and 0 on line 5. Last year we got close to a $5000 refund, so I decided it was time to try getting it closer. We are just a few years out of college, so have had job changes/pay increase just about every year, and went from paying a lot on student loans to now putting a lot into pre-tax retirement accounts, so our taxable income estimate was a very rough estimate. We also both get quite a bit of overtime which has made it even more unpredictable.
Some current background information:
My Base Pay: 51,000
Wife's Base Pay: 93,600
Combined overtime for 2016 estimate: 17,000-20,000
At the start of the year, we were each contributing 15% to pre-tax retirement accounts between my 401k/457 plan and her 401k plan. We were putting the rest of our extra income towards student loans, which we paid about 40,000 between Jan and Aug. Part of that was cash flow and part was cashing in savings. We still have about 8,500 in student loans, but the interest rate is about 3.86% which is the same as our mortgage, so we are just making the minimum payment for now because we wanted to get more into our pre-tax accounts.
When I adjusted our W-4's earlier this year, I selected married, and 1 in line 5 for each of us. I also had an extra 240/month withheld from my wife's, as that was what I came up with using the calculator. I ran it again today, and it looks like we are on track to owe about 4,000 if I do not make any changes. I think there was just too much guessing when I filled out the calculator because of not knowing what we would make in overtime and pay raises throughout the year.
Are there any resources that would be able to give me a better estimate early in the year or would I be best off just selecting married withhold at single rate and claim 0 for line 5 and maybe adjust to have less held later in the year? Or should I fill out the calculator on just our base pay?
Next year will hopefully be more stable as far as what our pre-tax contributions are, but not knowing on overtime still throws a wrench in it.
Can anybody give me some advice on how I should go about filling out the W-4's? Please ask if you need more information to help me out.
