I am overpaying on Federal Taxes (payroll). I want to adjust my withholdings so I break even by end of year.?

Question

Is there a chart I can use as a cheat sheet to update W-4 so I am not going to owe or be owed a substantial amount come tax time ???

Answer 1

Thus first of all figure out what will be your yearly income for 2007. Then what will be your taxable income (income minus your deductions including standard deduction and exemptions). Then what will be the Federal tax on your total income.

Now from your paycheck stubs find out how much federal taxes you have already paid. Then calculate what is the amount remaining to be paid in 2007.

Then divide this remaining Federal tax amount by the number of remaining pay periods in a year to figure out the approximate amount of Federal withholding per pay period. Based on this figure you can submit a new W4.
Sorry, there is no simple method.

Answer 2

The W-4 Form has a lot of info regarding this question. There is even a worksheet to help you. However, the general rule of thumb is that you are entitled to one exemption on the W-4 for every one you claim on the Form 1040. For example, if you are Single and claim yourself on the Form 1040, you should claim no more than Single and 1 on the W-4. If you are Married with 5 kids, the no more than Married and 7 on the W-4 with your spouse claiming Married and Zero (no more than 7 should be taken between the 2 of you).

Now, if you itemize; you can claim 1 extra exemption on the W-4 for about every $2500 in deductions above the Standard Deduction you will take on the 1040. I'd advise you to play it safe and not take extra exemptions unless you are 100% certain you will have enough to itemize. You don't want to owe IRS at tax time.

Answer 3

The simplest approach is for every $300 you received last year in your refund, increase the number of allowances on your W-4. For example if if you're single and only have 1 job, your W-4 might show S-2. Try increasing it to S-3 or 4. This will put more money in your pocket during the year.

Most people think it's good to get back a huge refund. This isn't so. Think about it, the Government has your money all year and they don't pay you interest on it when they give it back to you. That money could be in your pocket working for you (investments, savings, bonds, CD's).

Answer 4

There are worksheets included with the W-4 to calculate exemptions for specific situations - you can download them at irs.gov. You don't give enough information in your question for anyone to advise on how many more to claim.

If you are getting a big refund because you are receiving EIC, you can request that you get some of it as advanced EIC payments in your paychecks.

Answer 5

you risk underpaying by doing that...consider it a bank account you cannot withdraw from and continue to pay. Ask youe employer to adjust the wages if you really want to do that.their payroll dept should know approximatly how much to with hold.

1 question..if you dont know how much to take back then how do you know you are over paying?