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Why does it seem so terrifying to adjust my W-4?

Home Tax Reduction Why does it seem so terrifying to adjust my W-4?

  • Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    After hitting the IRS Calculator, it suggests that we both change to married and each withhold a certain amount. For some reason, I am absolutely terrified to make the adjustment. I cannot figure out why.  On top of that, it should allow us to pocket about $6,640 for the remainder of the year and/or  ~$9,000 for an entire year.

     

    That is by no means a lot of money; however, that’s either four student loan payments and/or one to two really nice vacations for the wife and baby.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213493 Reply
    Liked by Craigy
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 2020
    Joined: 09/16/2016

    Because if you’re like me (and most people), the thought of having to make an extra payment is terrifying.

    Well maybe not terrifying, but really f’ing irritating.  😉

    Did y’all overpay in 2018?  How big was the refund you just got?  Will you make about the same money in 2019 as in 2018?  Is the adjustment less than last year’s overpayment (refund)?

     

    LEVEL 1 WCI FORUM MEMBER.

    #213495 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    Last year’s federal tax refund was $4,532.

    This year is not like last year. My wife was part-time January through May. She took three months of maternity leave. She then joined the hospital in August as full-time faculty. She basically doubled her salary.

    In addition to that, I just got a 10% raise effective 4/01/2019.  I also got a bonus nearly twice as big as the previous year.

    So more money, a new kid, and a bigger bonus.  My 1099 consulting should be roughly the same as last year at $6,000-$7,500.

     

    The only variables out there are my K-1 investments.

     

    Your Results

    Based on your responses, your anticipated income tax for 2019 is $49,802. In addition, you appear to be subject to an additional Medicare tax of: $707.4. The recommendation below addresses both of these tax obligations.
    If you do not change your current withholding arrangement, you will have $53,868 withheld for 2019 resulting in an overpayment of $3,358.72 when you file your return.

    To meet your anticipated tax without having too much or too little withheld, complete a new Form W-4 for each job.

    Here’s how:

    • You and your spouse should each enter 0 on line 5 of all your Forms W-4.
    • Enter on Line 6 of each Form W-4 the following amounts for the job shown:
      • Job 1 (which has a projected salary of $150,000): $90 per paycheck.
      • Job 2 (which has a projected salary of $155,000): $186 per paycheck.
    • Check the “Married” box on your Forms W-4.

    Based on the information you entered, if you complete a new Form W-4 for the rest of 2019, your withholding will approximately equal your anticipated tax, and any refund or balance due should be about $0.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213497 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2273
    Joined: 03/01/2018

    check out excel1040.com – download the 2019 tax estimator, input your numbers, see if it jives with the numbers that would come out after your W-4 adjustments.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #213502 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    Wow! That is detailed.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213505 Reply
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 2020
    Joined: 09/16/2016

    You expect to take home an additional $6,640 this year by adjusting, yet the calculator says you are on course for only a $3,358 overpayment, you only got a refund of $4,532 last year, and you will be making dramatically more money this year.

    Unless there is something missing, the numbers don’t seem to work.

    LEVEL 1 WCI FORUM MEMBER.

    #213508 Reply
    Liked by adventure, pulmdoc
    Avatar bean1970 
    Participant
    Status: Physician
    Posts: 533
    Joined: 07/12/2017

    Just wait until you need to do it again…and this one sounds like it will be a doozie…..

    https://www.wivb.com/news/national/irs-to-release-new-w-4-what-you-need-to-know/1992553969

     

    #213509 Reply
    Liked by Craigy
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    I had both of our salaries factored in on smartasset.com down to within $4 of what we actually receive. Close enough for me.   I changed each of us to Married (currently single & 0), made the additional withholding adjustment, and it shot our net pay up some. $374/month more for me and $456/month more for her.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213510 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7950
    Joined: 01/09/2016

    I had both of our salaries factored in on smartasset.com down to within $4 of what we actually receive. Close enough for me.   I changed each of us to Married (currently single & 0), made the additional withholding adjustment, and it shot our net pay up some. $374/month more for me and $456/month more for her.

    Click to expand…

    I love SmartAsset – use it as a quick shortcut so many times that I don’t have time or need to get out the big guns (ad-hoc estimates). It’s also good for many location-specific calc’s.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #213558 Reply
    Liked by adventure
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4229
    Joined: 01/08/2016

    regards to your title I don’t know why it is terrifying. Why don’t you get in the habit of changing it every quarter just to see what happens….

    #213567 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    I just don’t want to screw it up and owe money. I think I’m gonna bite the bullet and see what happens. At least ride it to Q4. Worst case, it will be either sitting in a Money Market or at the very least helping pull down principal on our student loans. If I need to pay significant taxes, I can access it.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213581 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    “””I love SmartAsset – use it as a quick shortcut so many times that I don’t have time or need to get out the big guns (ad-hoc estimates). It’s also good for many location-specific calc’s.”””

    Yes. I used the heck out of it when trying to establish our budget. When my wife went full time, it allowed me to figure out her net very closely and also run multiple scenarios regarding the pension, 403b, and 457.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213585 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4229
    Joined: 01/08/2016

    I just don’t want to screw it up and owe money.

    Click to expand…

    do you understand safe harbor?

    #213588 Reply
    Liked by adventure, Hank
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    Not exactly. That’s paying quarterly tax estimates and you’re penalty free as long as you pay 90%? I’m sure it’s way more complicated than that.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213594 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    Does it apply to W-2 employees?

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #213595 Reply

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