Basic FIT question

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First off, just a basic hypothetical question so please note that I am not seeking professional tax advice. I think this is a pretty simple question - note that I'll leave most #s and the back story out, but please let me know if its needed:

* wife and I have one child; we file FIT joint; I currently claim 2

* '13 earnings will be ~$155k all-in, joint

* My wife is self employed and sends estimated taxes in each quarter. Seems to be no problem there- usually a small refund

* My earnings are roughly $110k and I currently claim "2" however I am confused:

If I drop this to 1 instead of the current 2, my bi-weekly take-home pay will drop a bit, which I understand, but does it pretty much net-net out once we receive our tax return?

Does that even make sense?

Point being: I'm a little worried about the FIT withholdings from my pay being a little too low so I'm wondering if dropping it to 1 will help "cover" me and then the tax return will "pay back" the difference/overage come refund season. I do understand the "lending free $ to the government" argument, but given our real estate situation (see my other posts), we don't want any surprises come tax filing. I would rather pay a bit too much each pay period with the expectation of recapturing $/break even come tax refund (for rental property reserve fund- again see my last thread).

I also realize I could withhold an additional amount, but wouldn't claiming 1 instead of 2 just be easier?

Please resist the flaming... I consider myself intelligent and financial competent, but taxes- not so much.

Thank you.

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NikeFace said:   First off, just a basic hypothetical question so please note that I am not seeking professional tax advice. I think this is a pretty simple question - note that I'll leave most #s and the back story out, but please let me know if its needed:

* wife and I have one child; we file FIT joint; I currently claim 2

* '13 earnings will be ~$155k all-in, joint

* My wife is self employed and sends estimated taxes in each quarter. Seems to be no problem there- usually a small refund

* My earnings are roughly $110k and I currently claim "2" however I am confused:

If I drop this to 1 instead of the current 2, my bi-weekly take-home pay will drop a bit, which I understand, but does it pretty much net-net out once we receive our tax return?

Does that even make sense?

Point being: I'm a little worried about the FIT withholdings from my pay being a little too low so I'm wondering if dropping it to 1 will help "cover" me and then the tax return will "pay back" the difference/overage come refund season. I do understand the "lending free $ to the government" argument, but given our real estate situation (see my other posts), we don't want any surprises come tax filing. I would rather pay a bit too much each pay period with the expectation of recapturing $/break even come tax refund (for rental property reserve fund- again see my last thread).

I also realize I could withhold an additional amount, but wouldn't claiming 1 instead of 2 just be easier?

Please resist the flaming... I consider myself intelligent and financial competent, but taxes- not so much.

Thank you.


The W-4 form with which you choose how many exemptions to claim has a worksheet to calculate the proper number. Any deductions, credits or other income are considered as well. Lowering your exemptions will increase your withholding. If you withhold too much, you will get a refund.

If you're simply looking for the easiest way to have a bit more paid in, your wife could just make bigger quartly payments. It's a joint return so it doesn't matter which of you pays in a bit more.

NikeFace said:   First off, just a basic hypothetical question so please note that I am not seeking professional tax advice. I think this is a pretty simple question - note that I'll leave most #s and the back story out, but please let me know if its needed:

* wife and I have one child; we file FIT joint; I currently claim 2

* '13 earnings will be ~$155k all-in, joint

* My wife is self employed and sends estimated taxes in each quarter. Seems to be no problem there- usually a small refund

* My earnings are roughly $110k and I currently claim "2" however I am confused:

If I drop this to 1 instead of the current 2, my bi-weekly take-home pay will drop a bit, which I understand, but does it pretty much net-net out once we receive our tax return?

Does that even make sense?

Point being: I'm a little worried about the FIT withholdings from my pay being a little too low so I'm wondering if dropping it to 1 will help "cover" me and then the tax return will "pay back" the difference/overage come refund season. I do understand the "lending free $ to the government" argument, but given our real estate situation (see my other posts), we don't want any surprises come tax filing. I would rather pay a bit too much each pay period with the expectation of recapturing $/break even come tax refund (for rental property reserve fund- again see my last thread).

I also realize I could withhold an additional amount, but wouldn't claiming 1 instead of 2 just be easier?

Please resist the flaming... I consider myself intelligent and financial competent, but taxes- not so much.

Thank you.

All nets out when you file your tax returns next year.
You can do a bunch things assuming you file MFJ (a) drop the no. of allowances claimed in W4 item 5 (b) Additional amount in W4 item 6 (c) Spouse makes a larger estimated tax payment.

Personally, given that the SE income is relatively small compared to the total, I would simply have everything withheld from the paycheck instead of doing estimated taxes. You can adjust the paycheck withholding towards the end of the year in case your initial calculations are off.

The advantage of paycheck withholding is less things to file, no deadlines to worry about, and no need to make sure the right amount is paid each quarter.

Thank you for the replies. I'll throw another question out there. I work for a smaller employer. One of my employees is having a similar but stranger issue. He just found out that he owes the Feds ~$3k for 2012 taxes. He makes just under $100k. Here's the catch: he got married in 2008 yet he just realized that he has been claiming "single" for FIT although he is married and filed joint each year...

I guess this is possible to slip through the cracks? Could there be repercussions for this? Obviously he lost out on deductions but was likely taxed at a higher rate than he should have been throughout 2012 and years prior. He fixed this on Fidelity's website yesterday (pay company, record keeper etc). Most importantly, is there any way to correct this and rework his taxes before he mails a check for $3k to the Feds or is it too late?

Thanks again.

What you claim on the W4 doesn't matter as long as it gets the Feds close to enough money for what you owe. Then you make up the difference in April, hopefully with a safe harbor for any under withholdings. Get within 90% of your taxes due, within $1k, or withhold 100-110% of last years' taxes and you'll be fine regardless of what the actual withholding was.

NikeFace said:   Thank you for the replies. I'll throw another question out there. I work for a smaller employer. One of my employees is having a similar but stranger issue. He just found out that he owes the Feds ~$3k for 2012 taxes. He makes just under $100k. Here's the catch: he got married in 2008 yet he just realized that he has been claiming "single" for FIT although he is married and filed joint each year...

I guess this is possible to slip through the cracks? Could there be repercussions for this? Obviously he lost out on deductions but was likely taxed at a higher rate than he should have been throughout 2012 and years prior. He fixed this on Fidelity's website yesterday (pay company, record keeper etc). Most importantly, is there any way to correct this and rework his taxes before he mails a check for $3k to the Feds or is it too late?

Thanks again.


It doesn't matter what you put on your W4, only how you file the return. The IRS could care less. The numbers there simply help your payroll people determine the proper level of withholding based on your status.

If fact, if two people both put 'married' on their W4, they'll likely underwithold. Many times, one person will leave theirs at single-0, the other will put married-1 or married-2. Claiming a set number of exemptions works for most people, but to fine tune the large jumps this creates, they provide the box for an additional dollar amount. Some people always set up the W4 to initially withhold the least possible amount, then add the proper per pay period additional withholding in dollars in the box designated for that purpose.

You're probably doing your 2012 taxes right now, so you should know pretty closely what you'll owe for 2013 too. The IRS, and lots of online calculators will tell you exactly what you need to set your withholding to. In your case, just adjust your wife's quarterly payments to the right amount. For your co-worker, they're just withholding too little, and if they owe $3000, then they owe $3000. They can keep that from happening next year if they adjust their (or spouses) W4 witholdings.

NikeFace said:   Thank you for the replies. I'll throw another question out there. I work for a smaller employer. One of my employees is having a similar but stranger issue. He just found out that he owes the Feds ~$3k for 2012 taxes. He makes just under $100k. Here's the catch: he got married in 2008 yet he just realized that he has been claiming "single" for FIT although he is married and filed joint each year...

I guess this is possible to slip through the cracks? Could there be repercussions for this? Obviously he lost out on deductions but was likely taxed at a higher rate than he should have been throughout 2012 and years prior. He fixed this on Fidelity's website yesterday (pay company, record keeper etc). Most importantly, is there any way to correct this and rework his taxes before he mails a check for $3k to the Feds or is it too late?

Thanks again.


His W4 status only plays a part in how much he's sending to the feds each paycheck, not how much he actually owes. If he's filing joint and claims the correct deductions, then he actually owes $3000. He didn't miss any deductions by putting single on the W4. He just underpayed through the year. Which, I'm not sure how he managed to do really. Single withholding is higher than married withholding. Probably has to do with the number of exemptions or the spouses withholding.

Nothing to be fixed on the 2012 taxes. But at $3000, depending on what the spouse makes, he might owe some penalties...

Thank you all

I believe that a single person is in a higher marginal tax bracket than a married couple (joint filing) filing the same amount. He can amend his taxes using the 1040X. The married couple need to discuss the situation and figure out the best way to file.

rawman1 said:   I believe that a single person is in a higher marginal tax bracket than a married couple (joint filing) filing the same amount. He can amend his taxes using the 1040X. The married couple need to discuss the situation and figure out the best way to file.

OP states that coworker filed as married (joint, presumably), so the withholding status doesn't matter. Unless, of course, they screwed up their tax return too, which seems like a possibility.

http://www.irs.gov/Individuals/IRS-Withholding-Calculator

I use the IRS withholding calculator and recalculate my withholding a few times a year based on bonuses and pay changes. I've claimed as many as 24 - YES, 24 - in order to get the numbers to come out right at the end of the year.

I agree with the suggestion that you adjust your withholding to take your wife's income into account and skip the estimated payments. My employer permits me to adjust my own withholding online, so it is really simple to change it from time to time as things change.



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