Help w/Tax Withholding Forms

[sophie832]

I do DH and my taxes every year. 2011 will be the first year we go long, since we'll have a full year of mortgage interest. We got married in Nov. of 2008, but I've never filed updated withholding forms at work. Just realized I'm still listed as "single" on my paycheck, panicked, got new forms to fill out at my HR dept., then got frustrated trying to figure out how to fill them out. I was worried that I was committing tax fraud, but apparently I'm not. This is what I am understanding: as long as we file out actual tax forms correctly, the withholding can be whatever I want it to be.

The reason I couldn't figure out how to fill the forms (W-4 and the CA State form) out is because DH has been getting unemployment for 2 years. That is due to end (99 wk. maximum) in late December. On the withholding form, you can either choose to be married and the sole source of income in the household, or married w/2 incomes, or married but at the single rate. The plan is for DH to get a job next year, so then we'd have 2 incomes, but at this point we really only have 1 (or at least, we will when Dec. comes around). So, I had no idea which box to check on the form, or if I needed to fill out all the supplemental forms that come with the original form.

Ever since I started working, I've taken 2 exemptions on the W-4 form, and 1 on the CA State. When I was filing single, I used to pay. As soon as DH and I started filing joint, we got a refund. I am fine with getting a refund (yes, I know the argument about putting the $ into a savings account instead of paying extra to the govt. and getting it back later). In fact, I'd prefer to get a refund. So, if I keep getting a refund, and am happy with that, do I even need to change the forms at all? All that would do is change the rate/amt. that is withheld from my paycheck for taxes, right?

 

[sam_gordon]

All that would do is change the rate/amt. that is withheld from my paycheck for taxes, right?

That is my understanding also.

 

[EMAW_KSU]

I do DH and my taxes every year. 2011 will be the first year we go long, since we'll have a full year of mortgage interest. We got married in Nov. of 2008, but I've never filed updated withholding forms at work. Just realized I'm still listed as "single" on my paycheck, panicked, got new forms to fill out at my HR dept., then got frustrated trying to figure out how to fill them out. I was worried that I was committing tax fraud, but apparently I'm not. This is what I am understanding: as long as we file out actual tax forms correctly, the withholding can be whatever I want it to be.

The reason I couldn't figure out how to fill the forms (W-4 and the CA State form) out is because DH has been getting unemployment for 2 years. That is due to end (99 wk. maximum) in late December. On the withholding form, you can either choose to be married and the sole source of income in the household, or married w/2 incomes, or married but at the single rate. The plan is for DH to get a job next year, so then we'd have 2 incomes, but at this point we really only have 1 (or at least, we will when Dec. comes around). So, I had no idea which box to check on the form, or if I needed to fill out all the supplemental forms that come with the original form.

Ever since I started working, I've taken 2 exemptions on the W-4 form, and 1 on the CA State. When I was filing single, I used to pay. As soon as DH and I started filing joint, we got a refund. I am fine with getting a refund (yes, I know the argument about putting the $ into a savings account instead of paying extra to the govt. and getting it back later). In fact, I'd prefer to get a refund. So, if I keep getting a refund, and am happy with that, do I even need to change the forms at all? All that would do is change the rate/amt. that is withheld from my paycheck for taxes, right?

That is all that would change is the withholding. There would be no change going to married but withhold at the higher single rate.

 

[Ava]

You are correct. As long as you fill out your taxes correctly, it doesn't matter how many exemptions or what status you claim on your W-4. All the W-4 does is change how much taxes are withheld from your paychecks. If you are happy with the amount withheld/getting a refund, you don't need to change anything.

 

[Cheshire Figment]

All that the W-4 Form does is tell your payroll department what formula to use for computation of withholding.

You can choose between married or single (more deducted as single) and any number of exemptions (Zero is maximum dollars deducted). If you claim more than ten deductions the employer is required to send a copy of the W-4 to the IRS for a determination if it is excessive.

A simple explanation of withholding is it looks at the individual pay period, takes your gross taxable pay for that period and annualizes it, deducts the standard deduction and the full value of all expemptions you have claimed and computes the tax on that amount. It then divides that tax by the same factor it used to annualize the income, and that is the withholding for the period. (You really don't want me to explain the detail.)

When working with tax clients I will look at the most current year tax return, estimate the tax for the current year, see what has been withheld, how much more will be withheld before a change goes into effect, how much more needs to be deducted from their pay during the remainder of the year, what is the amount needed per pay period, and how many exemptions need to be claimed. Doing this I have had clients who have legitimately claimed married with 14 exemptions to get proper withholding. But normally my estimates are good enough that the person owe or reund amount is under $200 when the next year's return is filed.

Mike (CPA)

 

[sophie832]

Thank you so much for all the quick responses!!! I knew people on the DIS would come through I feel better about it now. I guess I'll wait to see how our 2010 taxes go, and take it from there. Unless we end up paying, I'm not changing anything!

 

[seashoreCM]

This may take several years to accomplish but if you keep getting a huge refund and your financial situation is almost the same next year, you might simply change your W-4 to add another of those thingies (allowances) over what you had previously.

I used to be quite accurate at getting withholding close to my actual tax bill, but lately I have had to get an extension of the deadline almost every year. What this means is I have to keep on having much more withhholdings than I think is needed because both getting an extension and owing more tax means penalties.