Updating IRS withholdings

Avatar for 2locachicas
iVillage Member
Registered: 05-14-2003
Updating IRS withholdings
8
Thu, 03-09-2006 - 11:31am

Right now my husband takes the "standard" withholdings for his income. I stay at home so he takes all 5 us plus the head of household. We need to revamp that because the IRS owed us 9k this year!! I don't want to use that as a "savings" account like some people do because that is over 500 a month I could be putting on my own bills or making interest for ourselves. Next year will be about the same if we keep it where it is at because we have some adoption tax credit left from our youngest daughter & we now have 3 children which helps alot.

If I have him take 9 is that too many? I want to underestimate because I do some part time consulting from home and I will have to pay taxes on that....but it won't be much.

Thanks!

iVillage Member
Registered: 03-17-2003
Thu, 03-09-2006 - 12:41pm

To find out the effect of withholding and a paycheck go to www.paycheckcity.com.

Toolbar on the left mouse over "Personal Calculator" and then click on "Form W-4 Assistant." The interactive form will produce information on which to base a decision.

Hope this helps.

Carolyn

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Thu, 03-09-2006 - 12:50pm
Carolyn - that's a terrific link - thank you very much.

All my best,
Danni

iVillage Member
Registered: 03-27-2003
Thu, 03-09-2006 - 1:27pm

You can also do the following little calculation...

Take your tax liability from your current year's tax return...I think it's line 63 on your 1040 form...let's say that's $2000...Take how many payperiods there are in the year from your employer...let's say it's bi-weekly, which means it's 26 pay periods...Then divide your tax liability by the number of payperiods...2000/26 = $77 (rounded up)per payperiod. If you don't expect your income to change much this year you can submit a w4 to your employer asking that only that amount be withheld from your checks...you may want to round up even more just to be safe, but it'll give you a good idea of what to withhold so you don't get such a large refund every year...

iVillage Member
Registered: 09-02-2004
Thu, 03-09-2006 - 2:56pm

No, 9's not too many; you can take as many as 10 without the employer having to disclose anything, and the employer only codes as married or single. If you can estimate pretty close the dollar amount you'll owe in total for 2006, you can subtract what's already been withheld in 06 and divide what's left by the number of payperiods remaining and ask the employer to withhold to accommodate paying in that amount.

It's a common misconception that the W-4 needs to mirror your exact family circumstance. It can be manipulated easily so that you end up paying the $$ amount you desire.

I agree with you, I'd rather see $500 a month of my own money than a huge refund months down the road. But, other people may prefer the reverse. We're lucky that's an option.

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Thu, 03-09-2006 - 4:19pm

I think the "too many" issue is only if you end up OWING money and therefore are having too little taken out.

iVillage Member
Registered: 03-27-2003
Thu, 03-09-2006 - 8:14pm
Employers are no longer required to submit W4s above 10 allowances...As of the first quarter in 2005, I believe.
Avatar for mrslove2000
iVillage Member
Registered: 03-26-2003
Thu, 03-09-2006 - 11:14pm

Good to hear from you Carolyn. I have thought of you often since the BK board closed!

Susan

<ahref="http://www.TickerFactory.com/debt/wJLmWvM/"><imgborder="0"src="http://tickers.TickerFactory.com/ezt/t/wJLmWvM/debt.png"></a>

iVillage Member
Registered: 03-17-2003
Thu, 03-09-2006 - 11:31pm

Gosh it's good to see you Susan! Yes they closed our board. No problem, however, we are all alive and well on the Debt Q&A board. http://messageboards.ivillage.com/n/mb/listsf.asp?webtag=iv-mldebtqa&nav=start Come on over and say hello. Sweetpea, Kathy309, Inkeddogmom, imnitenurse, tgowens, me ... we are all settled in and having a great time.

I have thought about you too and hope all is well with you and yours.

Hugs to you.

Carolyn