To join in on this discussion, you must first
log in.
Discussion:W-4 Calculation
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> W-4 Calculation
Www.cpa1.biz (talk|edits) said: | 10 January 2007 |
| Almanacers,
Any of you have any good websites to calculate the W-4 federal witholding amounts. Also, how do you calculate it for the state. Please advise, thanks, Bj | |
| January 10, 2007 | |
| I use my calculator and Publication 15. Sometimes, I'll save the client's tax file as temp.* and enter the next year's amounts to figure the estimated tax. For the state w/h, I use my calculator. | |
| January 10, 2007 | |
| I suggest throwing them away. Unless you're single and in an apartment, or married, but only one spouse works, and in an apartment, and have no other income...the computations will get you the wrong answer every time. | |
| January 10, 2007 | |
| Throw what away? If you were talking to me, I only use Pub 15 to find out the weekly w/h in order to figure the tax to come out how the client wants it to come out. If you were talking about the worksheet that is attached to W-4 forms, I agree, throw them away. | |
Rgtaxservice (talk|edits) said: | 10 January 2007 |
| I agree. Throw away the W-4 calculations. I used the W-4 calcs many years ago and I ended up owing at year's end.
As a tax preparer, it was very embarassing. - Rick | |
| January 10, 2007 | |
| That's why you need a calculator to figure the actual tax (with the amounts entered into the calculator coming from the knowledge in your brain on how to calculate the tax), or you can figure it using your tax program in a temporary file. The best way to know how to figure the correct w/h tax is to know the total tax on the tax return. In general, when I say I use a calculator to figure the tax (for the less complex returns), I enter the income, the expenses and/or deductions, the exemptions, and then calculate the total tax and divide that by 52. Then I refer to Pub 15 to see how the client needs to claim in order to pay that much tax in weekly. This is just a basic description. I understand what JR and RG are saying. It takes experience to know that the amounts in Pub 15 can be way off, and that was my implication to BJ. | |
| 10 January 2007 | |
| I have a sister in-law who is a lawyer, she started using this form a number of years ago, (10) and has a big balance due every year. I talk to her EVERY year and tell her how much it cost in penalty and interest, but her response is always the same.....I spent hours going thru the form W-4 worksheet, and it tells me to claim Married, and 6 exemptions....I tell her to throw out the W-4 and claim Married but at single rate, 0 exemptions, and extra $500 per month withholding. ("But then my net pay will be less, and I can't live on that!). I haven't found one that works yet, so I use the same method as Deback....Tax liability / number of paychecks. | |
Death&Taxes (talk|edits) said: | 10 January 2007 |
| How many times do clients buy a house taking out a mortgage and want to cut withholding by raising exemptions? I believe an exemption this year is worth 63.90 of income. At 25% of this you get $16 a week more to take home and even with four more exemptions, it is $64. The usual response "Is that all. But I'm buying a house." I want to say "Let me call W and see if he will exempt you from tax" but when you multiply that by 52 weeks, you have over 3K to work with.
The error most taxpayers make with the W-4 is that both fill them out and each claims the exemptions. They don't split them. I don't mind using the worksheet but go to Publication 15 afterward just to see what havoc is caused. | |
| 10 January 2007 | |
| Sorry..didn't mean to inply that W-4 should not be used at all. It does work for the majority of my clients. It's just that when it doesn't work, you can be way off in a hurry. | |
Death&Taxes (talk|edits) said: | 10 January 2007 |
| My finding is that it doesn't work when pay method varies, like salary with separate commission checks, or people who might make a large percentage of income in a few weeks, with smaller checks in between.....the smaller checks have little withheld. Then again I like to preach the good feeling of sending a check with the return. "See, Sam did not get an interest free loan from you." "You're right, David, but why do I feel so funny." | |
| January 10, 2007 | |
| Does anyone remember back in about 1986, 1987, or maybe 1988, when the IRS required all employers to have all of their employees fill out new W-4 forms? What a nightmare tax season that was! Almost every one of my working clients wanted to know how to fill out their new W-4 forms that year, and that's when I got a lot of practice using the calculator and Pub 15--after I completed their returns, during the five or ten minutes I like to have as free time in-between every half-hour appointment.
| |
Death&Taxes (talk|edits) said: | 10 January 2007 |
| I was surprised not to find a calculator in Tax Tools, only a printable W-4 form, but you should look at this piece of utility software, BJ. For its price it is amazing. CFS software markets it. | |
| January 10, 2007 | |
| The IRS has an online W-4 Calculator at: http://www.irs.gov/individuals/page/0,,id=14806,00.html | |
Rgtaxservice (talk|edits) said: | 10 January 2007 |
| Wasn't '86 the year of Reagan's Tax Reform?
- Rick | |
| 10 January 2007 | |
| I got a demo of a national research company's Tax & accounting research software(not related to Lacerte), and I tried their W-4 program. Now I know that the numbers I used were not "standard" numbers, but it was a demo.... Put in Married filing joint, 10 exemptions <17, taxpayer paid weekly, annual wages of $40,000, spouse paid monthly, annual salary of $20,000, and self employment income of $6,000. Calculator said taxpayer should claim married and 630 allowances, spouse married and 73 allowances. When salesman called and wanted me to buy, I just sent him a copy of printout. He never called back! IRS has an online one as Beengel states above, and so does accountantsworld. | |
Www.cpa1.biz (talk|edits) said: | 10 January 2007 |
| Gosh,
Thanks for responses. I will use Pub 15 and the IRS link. | |
| January 10, 2007 | |
| That's great PJL!! Laughing out loud. Could I use that for just one year and then head to Rio? You figure I'd qualify for some earned income credit, too? | |
| 11 January 2007 | |
| I have had good luck using the CFS W-4 Calculator. However, I still find my self using my Lacerte Tax Planner module to test it's calculations. Perhaps the folks at Intuit (if they are listening in) can add a W-4 Calculator to their Tax Planner program. Hey! They could even charge extra for it...Now they are listening. | |
| January 11, 2007 | |
| PVV:
I've just sent your idea on to the appropriate people. Thank you!
| |
To join in on this discussion, you must first
log in.
