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Tax withholding?

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boykster:

--- Quote from: Samstag on October 16, 2007, 01:20:04 pm ---I prefer to be the short-term savings account for Uncle Sam.  I withold close the minimum I can get away with without being penalized.  With a %5 savings account I can easily make $100-150 extra on Uncle Sam each year.

[rimshot]Before taxes, that is...[/rimshot]

--- End quote ---

I used to have that approach, but after a couple of years of under-withholding and having to pay quarterly estimated taxes and penalties, I just said to heck with it.  I'm pretty good at balancing it out so that I'm square with uncle sam come tax time, but usually end up with a small refund that I sink into another type of investment.  One year I had to write a five figure tax check due to an accounting error at my wife's work (regarding some employee stock purchase plan shares that were bought and sold) and while it wasn't an issue to cover it, it stung enough that I'll eat the interest gains I didn't realize by overpaying on taxes and collecting annually.

We're very good about always having good cash reserves as well as strict savings plans.  I like to have at least 6 months of cash reserves in direct savings at all times (including mortgage and living expenses) and a good X multiplier of that in fairly easily accessed funds (CD's / money market / etc). 

As for the original question, it sounds like something was done incorrectly on her W4.  the easiest thing to do is to have her talk to someone in accounting and just tell them in non tax-speak how much she wants them to withhold.  A good rule of thumb would be to refer to your previous years tax return, find out what your nominal tax rate was, and have them withhold that %.  That way, no matter how it shakes out, you'll be in the right ballpark.  Yes, you can specify a particular % withholding, I do it all the time.

ChadTower:

Hrm... the particular % withholding may be a reasonable way to go.  I have told her several times to talk to the payroll people, it never goes anywhere and the paychecks without withholding keep coming.  I thought about the advice above to have her claim single but ran the numbers and it is not good advice.  That results in withholding of a full 10% lower than the rate for our combined income.

zaphod:
I believe you can also specify a dollar amount to withhold additionally each paycheck.

ChadTower:
Yep... where I was originally was thinking I'd have to have her single rate withheld and then an additional amount that way... turns out most of the advice sites (which were quite vague) said to figure the amount of allowances we have combined and then split them between us, putting most or all of them on the higher paying job while also subtracting whatever allowances the two earner worksheet says to subtract...   That's what I'm trying but problem there is that it gives you no visibility into what that actually means and if it will be enough.

This is the first I've heard of being able to just tell them "take out 25%" and they'd do it.

boykster:

--- Quote from: zaphod on October 16, 2007, 02:37:21 pm ---I believe you can also specify a dollar amount to withhold additionally each paycheck.

--- End quote ---

yep, that works too...figger out a rate, back calculate how much that would be, and have them withhold that amount.  That may be what they do when I specify a percentage to withhold, and they just know what to do with the numbers.

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