W-4 Question

Consider using an online tax calculator such as the one at H&R Block.

For improved accuracy, estimate your remaining earnings and withholding for the rest of 2009. This won't be perfect but it will get you pretty close to knowing if you'll owe or not.

What is actually making you nervous? Are you concerned that you won't be able to pay the taxes due by April 15, 2010 or are you just uncomfortable with the idea of owing?

jen5276 said: I am a bit uncomfortable with the idea of owing....Since I never had to pay the IRS before.

I am thinking I should pretty much break even, maybe get a small refund or owe only a small amount, but I guess to be safe, I will put some money aside until then as a safety net.
Here is the IRS safe harbor rules (it is written for 2008 but AFAIK, same holds for 2009). In particular, if your withholding in 2009 is at least as much as 100%/110% of your 2008 tax liability, you should not have to worry about the IRS penalty. Just make sure you have the cash in hand to pay the difference, if any.


* You did not have a tax liability in 2007: If you didn’t owe taxes a year ago, then you won’t be penalized for underpayment this year. If you owe this year, this opens you up to potential underpayment penalties when you file next year if you underpay two years in a row.
* Your underpayment is less than $1,000: If you owe $5,000 and you paid $4,001 throughout the year through withholding and estimated payments, then you’re safe.
* You paid within 90% of your actual liability: If you owed $100,000 for 2008 and you made payments throughout the year that amounted to more than $90,001, then you’re safe.
* Through withholding and estimated payments, you paid more than 100% of your 2007 tax liability ($110% if your AGI is greater than $150,000): If you owed $5,000 in income taxes in 2007 and you owe $50,000 for 2008, as long as you paid more than $5,000 in 2008 (and made all your required estimated tax payments) then you will be safe from penalties.

Get a Turbo Tax. I've got one for 2008 from Amazon for just $5. Why old version? I needed to file an amendment on already filed 2008(which was done by a H&R Block specialist) for my first time home buyer credit. I asked H&R Block to file the amendment, and they were about to charge me $89 extra. Called Turbo Tax, and a rep said their software will guide me thru the whole process of getting the credit. Plus, that software had the W-4 worksheet with actual print-out which I could turn into my employer. It even helped me with 2009 1040-ES for the self-employed to find out whether I needed to make quaterly tax payments to IRS.

In fact, I had to punch in all 2008 1040 data manually to the TurboTax to get the home credit, and found out that the H&R Block specialist forgot about $600 worth of recovery credit that I was eligible. Luckily, I did receive an extra check of $600 from IRS right after the e-file, and now I know what it was. However, my question is how could a tax specialist forget about clients best interests?

Apparently, TurboTax claims that they guarantee maximum deduction, refund, and credit, and I am a believer.

UKEEKAZE said: However, my question is how could a tax specialist forget about clients best interests?
Because he/she is a seasonal worker whose best interest is to crank out tax returns as quickly as possible. As you found out, it's not that hard to get taxes done by the person who has your best interests in mind, best (pardon the conundrum..) - you!

SlimTim said: You're paying the IRS every time you get a paycheck, jen. They've tricked you, but you can be cured!

Your goal should be to owe as much as legally possible on April 15 without penalty. I missed by a little bit one year - the penalty is a high percentage, but since I really was close it was a very small amount.

I believe the general rules for how much you need to have withheld during the tax year are either:
Your actual tax owed minus $1000
OR
Your actual tax owed the previous tax year

As long as you meet either of those, you're ok. You should be able to specify a dollar amount to withhold instead of the "exemptions" black box. Or if you do pick "exemptions", take a look at the first paycheck that reflects it and do the math to check that you're above one of the minimums. But not by too much, that's just giving money away. It can be a little tricky if your income varies much, but you should be able to revise your withhholdings throughout the year to stay on track.

When I was working for a tiny company, I'd keep my withholding very low throughout the year, and then around this time of year revise it to "withhold the whole thing" to catch up.

Lot of effort for next to no FDIC insured interest.

UKEEKAZE said: You are right. She seems to be a seasonal worker, and I tried to contact her by calling the branch where she used to work but no one knows her. What really bothers me, though, is that my tax prepare package from H&R Block was the most expensive package that allows me to seek any further consult on tax issues for entire year. But all I got from them was to pay extra $89. I've had H&R Block for 6years but not anymore.Well yes, most dedicated tax preparers are seasonal. There is no way they could afford to keep their entire staff on the payroll for the other 8 months of the year.

The firms that offer the year-long consultation packages keep some of their senior people on staff all year-long - just enough to handle the usual load.

You did yourself a disservice if you paid for consulting and then you gave up because the ONE person you asked for wasn't there. Those firms usually close down all but one District office in the area between April 15 and January 2.

uutxs said: Here is the IRS safe harbor rules (it is written for 2008 but AFAIK, same holds for 2009). In particular, if your withholding in 2009 is at least as much as 100%/110% of your 2008 tax liability, you should not have to worry about the IRS penalty. Just make sure you have the cash in hand to pay the difference, if any.
* You did not have a tax liability in 2007: If you didn’t owe taxes a year ago, then you won’t be penalized for underpayment this year. If you owe this year, this opens you up to potential underpayment penalties when you file next year if you underpay two years in a row.Where did you get this from? Not the IRS, I hope!

You are safe from he estimated tax penalty if you had no tax liability last year -- but not if you had a tax liability last year that was fully covered by withholding. You do NOT need 2 years in a row of underpayment to get the penalty -- even assuming that they were using "underpayment" to mean "balance due." If you had any liability last year, and a balance due this year, you can owe the estimated tax penalty.

Anyway, I think that jen5276 was more concerned about having a tax bill to pay than avoiding this relatively minor penalty. And note that filing a false W-4 subjects you to separate penalties (including, potentially, criminal liability).

LH2004 said: uutxs said: Here is the IRS safe harbor rules (it is written for 2008 but AFAIK, same holds for 2009). In particular, if your withholding in 2009 is at least as much as 100%/110% of your 2008 tax liability, you should not have to worry about the IRS penalty. Just make sure you have the cash in hand to pay the difference, if any.
* You did not have a tax liability in 2007: If you didn’t owe taxes a year ago, then you won’t be penalized for underpayment this year. If you owe this year, this opens you up to potential underpayment penalties when you file next year if you underpay two years in a row.Where did you get this from? Not the IRS, I hope!

You are safe from he estimated tax penalty if you had no tax liability last year -- but not if you had a tax liability last year that was fully covered by withholding. You do NOT need 2 years in a row of underpayment to get the penalty -- even assuming that they were using "underpayment" to mean "balance due." If you had any liability last year, and a balance due this year, you can owe the estimated tax penalty.

Anyway, I think that jen5276 was more concerned about having a tax bill to pay than avoiding this relatively minor penalty. And note that filing a false W-4 subjects you to separate penalties (including, potentially, criminal liability).
Not the IRS; one of the top google search items. I didnt pay much attention to the first bullet; thanks for pointing that. I mostly go with the last bulleted item (sometimes 2, or 3) for my personal use.

Use the IRS Withholding Calculator to figure out your tax liability and number of exemptions. You will get a much more accurate plan.

If I made some money this year doing some work as an auto mechanic, do I have to fill out a form 10w40?

captainwho said: If I made some money this year doing some work as an auto mechanic, do I have to fill out a form 10w40?

or 75w90 for tranny work (may also apply to plastic surgeons)