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03-23-2013, 07:06 PM | #26 |
Scooby Specialist
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I'm using it. I just kind of thought there might be some helpful stories or tips to go along with it.
I've got enough on my plate for the next year as is. I'd like to avoid any nasty little surprises I can, especially ones that countless people here may have learned from.
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03-23-2013, 07:14 PM | #27 | |
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Your income may very well be taxed at 30% and hers at 10%. But add the two of your incomes together and you could have a combined income that requires a higher effective tax rate. Either way, your wife is clearly not having enough money withheld and she claims 0 on her W-4. 0 means that the bare minimum is withheld. I'd start by using last year's tax bill to figure out what your tax liability is and divide it by 12 to come up with your monthly tax bill. Then play around with your wife's allowances (start with 1 or 2) each month until the correct amount of money is withheld. |
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03-23-2013, 07:32 PM | #28 |
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What's the point where you start incurring a penalty for not paying enough throughout the year?
Things that don't matter: Personally, I'd just budget for the tax bill. |
03-23-2013, 07:45 PM | #29 | |
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03-23-2013, 07:54 PM | #30 | |
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You list your W4 as Married with "0" dependents. You make $100k/year. The government withholds taxes as if, at the end of the year, you and your wife are going to file a return showing a grand total of $100k in income. Say that equates to an effective tax rate of 25%, so they withhold $25k throughout the year. Your wife lists her W4 as Married with "0" dependents and she makes $50k/year. Same thing, government withholds as if the two of you are going to only report $50k in income (they don't take into consideration the other spouse's income in withholding). Subsequently, that may be an effective tax rate of 5%, so they withhold $5k throughout the year. When you go to file your return, your joint income of $150k over the year nets you an effective tax rate of 23% (less than your withholding, but greater moreso than your wife's). So you've withheld $30k, but the total bill is $34k and you're in the hole. Make sense? My first year married, I withheld at married with "0", my wife withheld at married with "2" (she has a daughter, and that's how she'd always done it). I made ~3x what she did, so at the end of the year she had had virtually nothing withheld from her check, so we owed big time. I've since adjust my W4 to add an additional $ withholding from each check in addition to listing married and "0". |
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03-23-2013, 08:09 PM | #31 | |
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When I went from standard to itemized deductions, I played around with my allowances until I got the proper amount withheld. For me, that turned out to be 3 (mortgage interest deduction and property tax deduction). |
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03-23-2013, 08:24 PM | #32 | |
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I'd probably take the total amount I owed this year (not my total tax liability) and divide by the number of pay periods. Then have that amount withheld on top of the current married 0. |
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03-23-2013, 08:24 PM | #33 |
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It's been a few years since my wife and I both worked but when I filled out my W4 there was a 2 earners worksheet that you filled out the yearly income of each to figure out your withholding amount.
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03-23-2013, 09:02 PM | #34 | |
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03-23-2013, 09:08 PM | #35 |
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03-23-2013, 09:11 PM | #36 |
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03-23-2013, 09:11 PM | #37 | |
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03-23-2013, 09:17 PM | #38 |
Scooby Specialist
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03-23-2013, 09:21 PM | #39 |
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03-23-2013, 09:40 PM | #40 |
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03-23-2013, 10:08 PM | #41 |
Ethon
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SA, should have named thread wealthy people problems...
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03-23-2013, 10:18 PM | #42 |
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03-23-2013, 10:48 PM | #43 | |
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That's why Integra96 should check. I'd guess (stress on guess) that it would mean hundreds more withheld not thousands over a year. He will probably need to have extra withheld. edited for clarity on who I was talking to/about Last edited by scaryfastskier; 03-23-2013 at 11:15 PM. |
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03-23-2013, 11:05 PM | #44 | |
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If both of you claim 0, unfortunately I can't think of anything else to do other than have your payroll departments voluntarily withhold more income for taxation. |
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03-23-2013, 11:23 PM | #45 | |
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A single person making $2K/bi-weekly would have $345 withheld while a married one would have $219 withheld. Like someone already pointed out, the tax withholding seem to be designed for a married person to be the only earner in the household. If they both used the single withholding, the problem would probably go away. So if you have a dual income household, make sure your taxes are withheld as if you were both single. themoreyouknow.jpg |
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03-24-2013, 12:00 AM | #46 | |
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On top of this, my wife is being furloughed. Double whammy. I'm trying to get her a job in the hospital system I work at. No furloughs and they pay better, but it'll be later in the year. We have to get our house ready to rent (about 4k) and move closer to work, it's costing $1100/month in driving expenses. How hard would I be hit with penalties for taking money from my 401k? I think it's time to get an accountant to help figure this stuff out. |
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03-24-2013, 12:13 AM | #47 | |
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Most plans do allow you to borrow from your 401(k) though, which may be a better bet for you. Check with your plan administrator, but key elements usually include: * Limited on how much you can borrow as a % of your total contributions to your plan (market gains and un-vested employer contributions may not be accessible) * Limited repayment period (could still be a few years or more) * You pay a fixed, low interest rate, that goes back to your account. * If you leave the job before repaying the loan, the outstanding amount may be subject to the previously mentioned tax penalties * There's usually a small processing fee from the plan administrator |
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03-24-2013, 01:56 AM | #48 | |
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03-24-2013, 02:39 AM | #49 |
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Would it help OP at all if they filed as married filing separately? Is that completely dependent on whether or not they have any dependents?
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03-24-2013, 07:31 AM | #50 | |
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Quote:
Given that he is a quarter behind on the changes for this year, I still think extra until Jan 1 (or just save knowing he'll owe ~1/4 what he did this year) is in order. Agreed on that? |
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