Unfortunately, we made a significant amount more money this year, and didn't withhold enough so we ended up owing $2000. Since my husband started a new job in May of last year, he'll be making even more next year due to working a full year at the new job. So now I need to figure out how much we need to withhold throughout the year to avoid paying next year.
I assume I should count on at least $2000 additional. But how can I figure out how much more than that we need to hide away?
I do W4's every year and I still find them confusing.
FWIW, either or both of us will increase the amount we contribute to our 401(k) and his 457. I figure if we can't have it on hand to spend it might as well go toward retirement!
2007-04-04 11:27:29 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
A refund is cool, but I prefer to break even or owe just a hundred or two.
2007-04-04 11:57:22 · update #1
The IRS provides an on-line calculator for exactly this question. Answer the questions and it will recommend a number of allowances to claim an estimate the refund or amount due based on your answers.
2007-04-04 12:02:24 · answer #1 · answered by STEVEN F 7 · 2⤊ 0⤋
You realize that owing money to the IRS is actually good for you, do you? It means you kept that money for a year and therefore gained interest on it. If you have the discipline to save money to write the check on April, it's better than receving a refund. A refund is not free money, it's money you gave away to the IRS instead of using it during the fiscal year.
That is only valid as long as your April check does not exceed a certain amount so the IRS can't claim a penalty. But even the penalty is surprisingly low. You can owe up to 6 grand and still not being hit with a penalty.
2007-04-04 18:46:20 · answer #2 · answered by Anonymous · 0⤊ 1⤋
How much to withhold depends on your filing status and how many dependends you claim at the end of the year and in which tax bracket you fall. If you are like most taxpayers and individual earnings less than $100,000 the I advice you to claim the number of depends which does not include yourself or your wife only the exemptions like your children or family member you claim. You ought to come out even the end of the year.
Joe M
Tax Accountant
2007-04-04 19:50:25 · answer #3 · answered by JOE M 1 · 0⤊ 1⤋
The link shows the IRS Tax rate for single, married, filing jointly, etc.
You are strictly talking about the tax on your income. So look at the chart and it will tell you how much tax you will need to pay. Keep in mind the adjustments (interest paid, personnel property). Also if you have income from other sources such as CD's stocks, etc. These raen't taxed at the same rate.
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
2007-04-04 18:35:20 · answer #4 · answered by jamv0051 3 · 1⤊ 3⤋
Go to paycheckcity.com, they have a good W4 helper tool that will tell you exactly what you need.
2007-04-04 18:34:00 · answer #5 · answered by sunshine 3 · 1⤊ 0⤋