I am not asking for advice in lieu of going to an accountant, but I wonder if anyone else has gone through this.
2005 was my first full year owning a home. It’s in San Francisco, so it’s expensive. Therefore, I had huge deductibles on my income taxes this year, and I am getting a juicy refund. All well and good so far.
I want to adjust my withholding so I will withhold enough less per week so that there will be only a small refund next year. I think I can do a better job of saving and investing my money than leaving it at 0% interest with uncle sam. So I hied me to payroll to change my W-4.
When I use the worksheet on page 2 of the W-4, it says I should take 10 deductions! :eek:
When I looked at the withholding tables available from the gov’t online, it seemed to figure out that I should take 5 deductions.
I’m playing it safe with 5, and after my next paycheck I should be able to tell if that was right. But I wish I didn’t have to play this game. Why is it so hard? And does anyone have a reliable way to figure this out (other than the trial and error approach that I’m already using)?
Roddy
There is a federal tax withholding calculator online. This is only Federal. California may have something similar.
Of course the calculator above assumes that you know how much you want withheld, which seems to be the case.
Same thing, same area. I did some quick calculations to figure out what I thought the withholdings should be and then used the IRS form to calculate what they suggested, numbers matched up.
I also wound up with a large number of deductions (something like 12 federal). Made me nervous so I ran my numbers again, looks about right (gives me an additional X dollars on each paycheck, and X is pretty close to last refund/12. Assuming that nothing dramatic changes in my situation that’s pretty close).
FWIW, I used the same form last year and came up with 7 or 8 deductions. (I’m in similar position, fairly big mortgage, recent purchase of first home, etc) I got nervous thinking that was a lot of exemptions, so I put 6 and forgot about it. I’m getting another big refund this year.
So, my lesson is, the form seems to give a pretty accurate read on what you should claim for exemptions. YMMV.