Please help me fill out my W4
December 14, 2015 6:38 AM Subscribe
Usually taxes make sense to me, but life is changing and I'm completely confused right now. I need to know how my (and maybe my spouse's) W-4 should be filled out. Pertinent info here, backstory below the fold... My income will be 75,000, spouse makes 63,000. One child, using dependent care FSA, last year before kid we itemized about 21,000 in deductions. How many allowances do each of us take?
I'm starting a new job tomorrow and I need to fill out my W-4. For the past few years my husband has had taxes withheld and I've paid estimated taxes so were a little rusty on dealing with W4s with two incomes. To complicate matters we had a baby this year so that will change things also. I've tried the calculators that are supposed to tell you how many allowances to take but the problem I'm running into is that they want to know what has happened so far in 2015 and I think whatever I do should only affect my 2016 taxes since I'm pretty sure I won't even be paid until January for this job. I think I could pretty accurately calculate how much tax we need to pay him 2016 but I have no idea how that relates to the number of allowances that I take. Help?
I'm starting a new job tomorrow and I need to fill out my W-4. For the past few years my husband has had taxes withheld and I've paid estimated taxes so were a little rusty on dealing with W4s with two incomes. To complicate matters we had a baby this year so that will change things also. I've tried the calculators that are supposed to tell you how many allowances to take but the problem I'm running into is that they want to know what has happened so far in 2015 and I think whatever I do should only affect my 2016 taxes since I'm pretty sure I won't even be paid until January for this job. I think I could pretty accurately calculate how much tax we need to pay him 2016 but I have no idea how that relates to the number of allowances that I take. Help?
If I were in your shoes, I would take two and have my spouse take two. You take one for yourself and one for your child, and your spouse takes one for themself and one because of the likelihood of child care credits (if you can claim $2000+ in child care expenses).
The issue here is that, when calculating withholding, each employer doesn't know how much tax liability you really have because they don't have information on the other spouse. If each party takes all the exemptions, each employer will withhold far too little and you may be penalized at the end of the year for not withholding enough. If one spouse takes the exemptions and the other doesn't, the withholding will be skewed, and one spouse will have way more taken out in taxes than the other. If neither party takes the exemptions, you end up giving the government lots of money in an interest-free loan that they'll have to pay you back (although if you can afford to withhold more by lowering the exemptions and wait for a refund, it is the safest choice from a tax standpoint).
Since both of you make a similar amount of money, and there's an even number of possible exemptions, both of you taking two will balance out the withholdings in a reasonably proportionate way across your paychecks. In the event things change with your salaries - one spouse no longer works, or one spouse begins to make substantially more money, you'll want to revisit this.
posted by I EAT TAPAS at 7:22 AM on December 14, 2015
The issue here is that, when calculating withholding, each employer doesn't know how much tax liability you really have because they don't have information on the other spouse. If each party takes all the exemptions, each employer will withhold far too little and you may be penalized at the end of the year for not withholding enough. If one spouse takes the exemptions and the other doesn't, the withholding will be skewed, and one spouse will have way more taken out in taxes than the other. If neither party takes the exemptions, you end up giving the government lots of money in an interest-free loan that they'll have to pay you back (although if you can afford to withhold more by lowering the exemptions and wait for a refund, it is the safest choice from a tax standpoint).
Since both of you make a similar amount of money, and there's an even number of possible exemptions, both of you taking two will balance out the withholdings in a reasonably proportionate way across your paychecks. In the event things change with your salaries - one spouse no longer works, or one spouse begins to make substantially more money, you'll want to revisit this.
posted by I EAT TAPAS at 7:22 AM on December 14, 2015
Looks useful: https://turbotax.intuit.com/tax-tools/calculators/w4/
posted by getawaysticks at 7:38 AM on December 14, 2015
posted by getawaysticks at 7:38 AM on December 14, 2015
Do you have other income ? (stocks, bonds, property, etc) or only the job ? What are your reserves like ? (have a rainy day fund, etc )
If you don't want to do any work, take zero exemptions, and get a refund when you file. This assumes you can live off the lower paycheck just fine.
If you both take 2, you may find yourself owing come tax time. If you've got savings/cushion to pay the bill (I'd think it'd be in the low hundreds, depending on other income), do that, and then compute your exemptions again at that time.
posted by k5.user at 7:41 AM on December 14, 2015
If you don't want to do any work, take zero exemptions, and get a refund when you file. This assumes you can live off the lower paycheck just fine.
If you both take 2, you may find yourself owing come tax time. If you've got savings/cushion to pay the bill (I'd think it'd be in the low hundreds, depending on other income), do that, and then compute your exemptions again at that time.
posted by k5.user at 7:41 AM on December 14, 2015
I'd take no deductions. In fact I take no deductions and send an extra $200 to the feds every paycheck.
Reason:
Because we're now in a bracket (and you are too) where together y'all are making a butt-load of money. When the feds look at your income singly, they don't know what your husband brings to the table, so they take it at face value. So they withhold at the rate for your $75,000, NOT the $138,000 you make together.
Unless you LOVE owing at the end of the year, be conservative, and adjust next year. (I might be too conservative, but we don't have kids or a house )
posted by Ruthless Bunny at 8:17 AM on December 14, 2015
Reason:
Because we're now in a bracket (and you are too) where together y'all are making a butt-load of money. When the feds look at your income singly, they don't know what your husband brings to the table, so they take it at face value. So they withhold at the rate for your $75,000, NOT the $138,000 you make together.
Unless you LOVE owing at the end of the year, be conservative, and adjust next year. (I might be too conservative, but we don't have kids or a house )
posted by Ruthless Bunny at 8:17 AM on December 14, 2015
You're likely going to hit the AMT, which is an abbreviation for "you lose all your deductions and also write a huge check". Plus your automatic withholding will be too low at least this year, probably next year too, maybe forever.
Take no exemptions, and do a fake tax return in TurboTax to figure out how much extra you're going to need to put aside. We're generally in for an extra $10k, give or take a couple grand.
posted by Lyn Never at 8:29 AM on December 14, 2015
Take no exemptions, and do a fake tax return in TurboTax to figure out how much extra you're going to need to put aside. We're generally in for an extra $10k, give or take a couple grand.
posted by Lyn Never at 8:29 AM on December 14, 2015
Take a look at the back of the W4. There's actually a pretty good little worksheet that tells you how much to withhold.
With some basic assumptions (3 allowances from the front of the sheet), I get that you should claim zero allowances and have ~$4000 extra withheld annually from your check. Assuming you're paid semi-monthly, that'd be $166 per check.
posted by Betelgeuse at 9:02 AM on December 14, 2015
With some basic assumptions (3 allowances from the front of the sheet), I get that you should claim zero allowances and have ~$4000 extra withheld annually from your check. Assuming you're paid semi-monthly, that'd be $166 per check.
posted by Betelgeuse at 9:02 AM on December 14, 2015
When I work on a W4, I always file married-0 even though we have two kids. More money is taken away in taxes that way, but it comes back to you in the end when you file if it's too much, and I have a terror of winding up with an enormous tax bill at the end of the year.
posted by Andrhia at 9:48 AM on December 14, 2015
posted by Andrhia at 9:48 AM on December 14, 2015
The IRS has a free online withholding calculator to help you figure out this exact solution. You enter your withholdings to date, your anticipated deductions, and some other details. You'll get the federal exemption count to place on your W4.
posted by JoeZydeco at 7:08 PM on December 14, 2015
posted by JoeZydeco at 7:08 PM on December 14, 2015
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posted by leaper at 7:22 AM on December 14, 2015 [1 favorite]