Help in getting my income tax withholdings properly adjusted.

[Homerboy]

Every year I end up getting a nice tax return check from the IRS after I take out my mortgage interest, dependent credits etc etc. While getting one big check is nice, I'd rather have that as close to $0 as possible so that I can have more spending/saving money during the course of the year.

I generally suck at this type of thing, so I'm looking for some help.
I'm not going to disclose my financial numbers in the thread, but if any one can generally help or point me down the right path it would be appreciated. I would be willing to disclose #'s to individual(s) via PM if I felt comfortable.

Thanks in advance.

 

[DaveSimmons]

Talk to HR, ask what the number of exemptions listed on your W-4 is. If the number is 0 or 1, increase it by 1.

Start an INGDirect.com account and put some money in it just in case you're now underwitholding. You need this anyway for emergencies.

All done except for donating to Child's Play to thank me

 

[EagleKeeper]

Look at the refund amount you get back.

Divide it by 3000. then increase the amount of withholding exemptions by that amount on your W4. That should bring you close to zero refund.

 

[spidey07]

Originally posted by: EagleKeeper
Look at the refund amount you get back.

Divide it by 3000. then increase the amount of withholding exemptions by that amount on your W4. That should bring you close to zero refund.

Is it really that easy?

I just followed the instructions on the W4 for wages/interest/gain then subtracted deductions and came up with like 8. Eitherway, it worked out well.

 

[dullard]

Originally posted by: spidey07
Is it really that easy?

I just followed the instructions on the W4 for wages/interest/gain then subtracted deductions and came up with like 8. Eitherway, it worked out well.

Yes, it is really that easy. And you should do it yearly or whenever you have a big change because it (a) is that easy and (b) may help you avoid penalties.

The W4 instructions are great for when you have no idea how much to withhold. But once you've been in a stable position for a year, do EagleKeeper's math and you are set (it is the same as what you just did but with the fluff that doesn't change frequently from year to year removed).

 

[EagleKeeper]

Originally posted by: spidey07

Originally posted by: EagleKeeper
Look at the refund amount you get back.

Divide it by 3000. then increase the amount of withholding exemptions by that amount on your W4. That should bring you close to zero refund.

Is it really that easy?

I just followed the instructions on the W4 for wages/interest/gain then subtracted deductions and came up with like 8. Either way, it worked out well.

The W4 drivers the personal exemptions.

The Federal personal exemption is about $3K per "dependent".
Not an exact science; but will keep you close enough so you will not get dinged by an underpayment, yet you will not be providing interest free loans.

And as Dave Simmons stated; put the difference to good use. If you can pay more down with the funds on the mortgage. If you do not have any nest egg; use it to build one.
Try to put the difference into an IRA/401K if possible (that way you are getting a double benefit).

 

[Homerboy]

I'm at a 8 right now... (2 dependent children and a wife w/ no income).
If EagleKeeper's method works (well enough) I will just wait until I get my 2006 check then in early 2007 and make the adjustment then. I guess that makes sense.

Granted I should have a change in my mortgage interest in 2007 as a home remodeling job should be done and the HLEC will roll into a straight deductible loan, but that should be of failry minimal consequence in the grand scheme of things.

 

[Homerboy]

oh and why would I increase the amount of withholding per paycheck? Wouldn't I decrease the withholdings from my paycheck so I get more per month on my check and less goes to the gov't?

 

[Homerboy]

coming back to this...
Ineed to reduce my withholdings ~$150 per paycheck. How do I do that? Bump down to a 7 from an 8?

 

[dullard]

Originally posted by: Homerboy
coming back to this...
Ineed to reduce my withholdings ~$150 per paycheck. How do I do that? Bump down to a 7 from an 8?

You need to increase the withholding exemptions by about 0.5. Since they are in whole numbers, you are in the worst case possible. Leave it where it is and get a big refund. Increase it the exemptions by one and you'll owe a lot at tax time and possibly owe a fine for underpayment.

There is a solution of course. Increase your exemptions by one AND have them withhold another $50-$100 per paycheck. The net result will get you right near the point you want. The additional exemption will give you ~$250 more per month, but then you tell them to reduce that $250 by $50-$100 and you are right at your $150/month mark.

 

[EagleKeeper]

There is a difference between withholding and withholding exemptions.

Increase the exemptions reduces the withholdings => $$ in your pocket

To remove $$ from your pocket decrease withholdings.

Do it one step at a time until you feel comfortable with the amounts being withheld and/or the difference from your baseline.

Or take the $150 and store it until the end of the tax year in an interest bearing account.

 

[Homerboy]

can't I just have them withhold another $150 per month and leave exemptions at 8 now? If I know I'm overpaying ~$150/month isn't that the easiest route? I had no idea you can just say "withhold $XXX"

And hell.... since I've been overpaying all year (10 months) couldn't I say "withhold $500 per month for November and December" to get me close to $0 for the year?

 

[Gunslinger08]

I'm wondering if I should claim 1 or 0. I really don't have anything to deduct. I don't own a home. About the only thing I might be able to deduct is student loan interest. I claimed 1 and I have a feeling I'm going to get screwed come April 15th.

 

[EagleKeeper]

Originally posted by: Homerboy
can't I just have them withhold another $150 per month and leave exemptions at 8 now? If I know I'm overpaying ~$150/month isn't that the easiest route? I had no idea you can just say "withhold $XXX"

And hell.... since I've been overpaying all year (10 months) couldn't I say "withhold $500 per month for November and December" to get me close to $0 for the year?

It will be up to your payroll department on how they will handle exact $$ requests.

 

[EagleKeeper]

Originally posted by: joshsquall
I'm wondering if I should claim 1 or 0. I really don't have anything to deduct. I don't own a home. About the only thing I might be able to deduct is student loan interest. I claimed 1 and I have a feeling I'm going to get screwed come April 15th.

At this point in the year, it may not matter.

1 is a safe choice as long as you are not dependent on anyone and do not have secondary income.

 

[Homerboy]

I talked to HR/Payroll lady
she said exemptions + $$$ is no problem. So I will likely bump up the $$ for the last few months to recoup something for the end of the year. Then just make it 8 + $150 for all of 2007. Sounds feasible hey?

 

[dullard]

Originally posted by: Homerboy
I talked to HR/Payroll lady
she said exemptions + $$$ is no problem. So I will likely bump up the $$ for the last few months to recoup something for the end of the year. Then just make it 8 + $150 for all of 2007. Sounds feasible hey?

You are really confusing me. Half of your posts say you want to get an extra $150 on each paycheck. Now half of your posts say you want to get $150 less per paycheck. Which is it?

 

[Homerboy]

You are really confusing me. Half of your posts say you want to get an extra $150 on each paycheck. Now half of your posts say you want to get $150 less per paycheck. Which is it?

ya know, now I'm confused too...

I posted this:
oh and why would I increase the amount of withholding per paycheck? Wouldn't I decrease the withholdings from my paycheck so I get more per month on my check and less goes to the gov't?

earlier which is I guess where I flipped it train of thought. I don't want to have MORE withheld. I want to get a BIGGER paycheck every 2 weeks. I guess I had a small aneurysm in the middle of this thread.

Ok rewind and erase.

If I want to get more CASH IN MY POCKET per paycehck, how do I go about doing that

 

[dullard]

Originally posted by: Homerboy
Ok rewind and erase.

If I want to get more CASH IN MY POCKET per paycehck, how do I go about doing that.

The only way is to increase the allowances on your W-4. You are at 8 now, so bump it up to 9. Then next paycheck, see if you need more tweaking (are they taking out too little or too much).

 

[EagleKeeper]

Be aware that when you cross into double digit withholding (1), a notice may be sent to the IRS regarding such amounts being requested.