Federal withholding calculators

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dparm

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Long story made short, I'm getting sick of always getting a tax refund. I'd rather have a bigger paycheck and get a refund closer to zero. Otherwise it's a 0% interest loan to Uncle Sam every year.

Is anyone aware of any calculators or tools to compute the correct number of exemptions I need? If it matters, I use the 1040-EZ since my tax situation is pretty straightforward (single, no dependents, standard deduction).
 
If you're over withholding by $3000 and get paid every 2 weeks, then reduce deduction by the amount of $115($3000/26) every pay.

Don't loan uncle Sam any money with free interest. Actually, you should have withholding even less so you will pay uncle Sam some hundreds dollars next April, but put those in saving account to earn interest during the year.
 
Originally Posted By: HTSS_TR
If you're over withholding by $3000 and get paid every 2 weeks, then reduce deduction by the amount of $115($3000/26) every pay.

Don't loan uncle Sam any money with free interest. Actually, you should have withholding even less so you will pay uncle Sam some hundreds dollars next April, but put those in saving account to earn interest during the year.



edit: Apparently your withholding number is subject to review by the IRS and they can tell you to refile a W4.
 
Originally Posted By: HTSS_TR
If you're over withholding by $3000 and get paid every 2 weeks, then reduce deduction by the amount of $115($3000/26) every pay.

Don't loan uncle Sam any money with free interest. Actually, you should have withholding even less so you will pay uncle Sam some hundreds dollars next April, but put those in saving account to earn interest during the year.


Although the interest you'll earn will be about 0%.
In the current rate environment, which will persist for at least another couple of years, regardless of who wins the election, the cost of letting the feds hold your money is nil.
 
1% APY is not that hard to get. In fact, I have that with my current bank. Still better than 0 (and not having access to it in an emergency, either).

Or, make some short-term investments and do better than the 3% inflation.
 
I don't want this to be a political debate, so please cut it out with those comments.

I am looking for reasonable advice on taxes.
 
If you really know your tax situation and can easily calculate what your taxes are based on current rates, take your exemptions for withholding to 0 and make your withholding payment your total estimated yearly tax bill divided by your number of paychecks. You can try it, but some HR departments will put up a hissy fit.
 
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I ended up throwing together an Excel sheet to figure it out. For next year, I should claim 2 for a refund of almost $0. Works out to almost $160/month extra in my pocket, plus whatever interest it earns.
 
Originally Posted By: JHZR2
Ive always liked this effective tax rate calculator to see what I should pay in total, and then you can calculate from there...

http://www.cpasitesolutions.com/content/calcs/TaxMargin.html

We got a scare a few years back because we were claiming married 2 and ended up paying like $8k. We are married and have to file single 0 and pay more. The system stinks bigtime.



Pretty similar to what I did. I just used the IRS website one and put my income, that I had $0 withheld this year, and it told me what I'll owe come April 15.
 
I used to try to get it close so I have to pay just a bit as close to zero as possible. Theat was easy when they allowed 20% accuracy. Now they want 10% accuracy.

One year I missed the mark by over 10%. Wow, the State of Michigan really got me with the penaties!
 
Aaaargh, never let your rich uncle (sam) keep your money!

There's nothing worse you could do except spend it.

It's easy to adjust the witholding, if you get it right it should always be less than 500 bucks plus or minus at tax time!
 
I've been getting huge refunds for the last few years, and since I'm among the 47%, I get back more than I pay.
I changed my status to married w/ FIVE dependents to raise mt take home pay and I STILL get a huge refund.
 
Originally Posted By: Kestas
I used to try to get it close so I have to pay just a bit as close to zero as possible. Theat was easy when they allowed 20% accuracy. Now they want 10% accuracy.

One year I missed the mark by over 10%. Wow, the State of Michigan really got me with the penaties!



Yeah, I think it might be safer to claim 1 and get a refund (albeit a smaller one) and give yourself a buffer.
 
Originally Posted By: Kestas
I used to try to get it close so I have to pay just a bit as close to zero as possible. Theat was easy when they allowed 20% accuracy. Now they want 10% accuracy.

One year I missed the mark by over 10%. Wow, the State of Michigan really got me with the penaties!


Wow, didnt realize they wantd 10% accuracy.

Really stinks for dual earners like us that pay a ton in taxes. You would think that as married, dual earners, we would file Married 2, right? Nope, we have to file single zero with a few hundred per pay period to be OK. Someplace the accounting is just plain stupid and screwed up. We get a little refund, but a few dollars more than we would like, but penalties scare me. Its not like Im getting 5% on money sitting with the govt. And Ill bet the penalties would take years worth of interest to recoup.
 
I don't understand why there's a penalty for underpayment from your withholding. As long as you get Uncle Sam what is owed by April 15, why should it matter?

One could always claim a very high number early in the year and then adjust to a different value and make catch-up payments before Dec 31, but that seems awfully complicated.

I will likely just increase my exemptions from 0 to 1 for next year. Extra $80/mo in my pocket and still a moderate refund.
 
There once was a time where people paid everything on April 15th. But, as you can imagine with human nature, not everyone set aside enough money for their tax bill. So, the IRS started withholding from paychecks and with quarterly payments.

Apparently now that isn't enough and they want their money as it's being earned. April 15th isn't soon enough for them.
 
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