W4 Help - Tax Season Screwed Me

Discussion in 'Community Discussion' started by ghsNick, Feb 14, 2017.

  1. ghsNick macrumors 68030

    ghsNick

    Joined:
    May 25, 2010
    #1
    Last year I got married and my wife and I both updated our W4's to say Married/1.

    Well, this year we ended up owing money and I'm wondering what I can do to avoid this next year?

    We file our taxes as Married Joint but should we both update our W4's to say Single/0 (instead of Married/1) to ensure more taxes are taken out of our paychecks and we actually get a refund next year?

    Any advice would be appreciated.

    Thanks!
     
  2. BeeGood, Feb 14, 2017
    Last edited: Feb 14, 2017

    BeeGood macrumors 68000

    BeeGood

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    #2
    If your household income hasn't changed significantly from last year, you could leave your selections the same and just fill in the "additional to be withheld" line with the amount you owe from last year. That'll basically get you square with Uncle Sam when you do your taxes next year.

    EDIT: One caveat - if you and your wife itemize, there is a possibility that certain deductions won't be available for you to take next year. You may have to make an even larger adjustment to your withholdings if that happens.
     
  3. ghsNick, Feb 14, 2017
    Last edited: Feb 14, 2017

    ghsNick thread starter macrumors 68030

    ghsNick

    Joined:
    May 25, 2010
    #3
    Thanks - I personally don't mind getting taxed more upfront to ensure I get a refund next year.

    Is it okay for both of us to change our W4 to Single/0 even though we'll file as Married Joint? Or do we have to put our W4 to Married?
     
  4. BeeGood macrumors 68000

    BeeGood

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    #4
    I'm pretty sure that's OK. I think the only way the IRS would know is if they audited you, and even then I'm not sure why they would care, unless you were doing it to have a ridiculously large return (which you're not).

    You might want to wait on a second opinion from the board, but I'm pretty sure that's OK.
     
  5. ghsNick thread starter macrumors 68030

    ghsNick

    Joined:
    May 25, 2010
    #5
    Yeah, I'm going to ask my HR Rep tomorrow.

    Worst case scenario I'll just take $50 out extra per paycheck - just thought I'd ask on if it was okay to put Single/0.

    Thanks
     
  6. rshrugged macrumors 6502a

    Joined:
    Oct 11, 2015
    #6
    Yes you can. There's a provision for it on the Employer Withholding Allowance Certificate -- " Married, but withhold at higher Single rate".
    It might be worthwhile for you to look over the form and worksheets --
    https://www.irs.gov/pub/irs-pdf/fw4.pdf

    There's also a withholding calculator -- https://www.irs.gov/individuals/irs-withholding-calculator
     
  7. C DM macrumors Westmere

    Joined:
    Oct 17, 2011
    #7
    Technically speaking, it's better to neither owe nor get anything back as that would mean you paid just enough and no more than needed, but that's rather hard to do. The next best thing is to owe a little as that means you never gave up more of your money than needed and got to keep more of it yourself.

    A refund is nice but what it essentially means is that you gave up more of your money over a period of time that you could have held onto.

    That said, more for peace of mind than anything else really, it can be better to pay a little more and then get a small refund essentially.
     
  8. maflynn Moderator

    maflynn

    Staff Member

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    #8
    I've always set my W4s to be set to deduct as if I was single, and for the longest time I set it to single/0. Now with two kids I have it set to single/2 even though the tax returns are combined and two deductions
     
  9. Tomorrow macrumors 604

    Tomorrow

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    #9
    I'm married, but I have my withholding set to Single/1 dependent (we have a child).
     
  10. einmusiker macrumors 68030

    einmusiker

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    #10
    why give the government an interest free loan?
     
  11. maflynn Moderator

    maflynn

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    #11
    That's one argument, another side is that it allows people to get one large check back and for some that may be easier to do then saving up on their own.

    For me, my tax situation can be a tad challenging and I'd rather over pay a bit then risk under paying.
     
  12. samiwas macrumors 68000

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    Atlanta, GA
    #12
    It's probably not information you want to give, but it kind of depends on how much you make, how much you usually get back, and how much you owed this year. Is it the difference in $100? $1,000? $5,000? Because that all makes a huge difference.

    If i didn't have rental income, I would structure mine as Married/0 or Married/1, depending on what I did or didn't back previously. But, with untaxed rental income, I structure mine as Single/0 and have extra taken out each week to counteract the taxes that will need to be paid on the rental income. It usually works out to having to owe a small amount, or getting a little bit back.

    But, for anyone to truthfully answer this question, they need to know your circumstances.

    Unless you are an investor, it really makes no difference. Savings account interest rates right now are nothing to make decisions over. I have over $20,000 in my savings account and my interest last year was $1.68.
     
  13. Plutonius, Feb 20, 2017
    Last edited: Feb 20, 2017

    Plutonius macrumors 604

    Plutonius

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    Location:
    New Hampshire
    #13
    If I was in that position, I would worry more about how I manage my budget :). Counting on a large tax refund is not the way to go.
    --- Post Merged, Feb 20, 2017 ---
    People putting all their money in a savings account is not a good idea. You could have invested half the money in a fairly safe and quick to liquidate investment and easily got a 5% return ($500).

    I use Vanguard and highly recommend it.
     
  14. maflynn Moderator

    maflynn

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    #14
    Like I siad others find it useful - to each his own
     
  15. ghsNick thread starter macrumors 68030

    ghsNick

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    May 25, 2010
    #15
    What I did was update my W4 (and my wife's) to take an additional $20 out per paycheck to ensure we break even next year and don't owe anything or get anything additional back.

    Thanks for your help everyone!
     
  16. samiwas macrumors 68000

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    Atlanta, GA
    #16
    Most of my money is in seven different investment accounts which have increased anywhere from 13-42% in the last year. I keep a savings account for quick access if needed, without having to go through the selling of investments.

    If there was some simple way to just plop some money in and get no-risk 5% return, with easy withdrawals, I could get into that.
    --- Post Merged, Feb 20, 2017 ---
    I don't ever count on a large refund, as I usually end up owing at tax time, but one way some look at it is that they get used to living on the smaller take home, then get a decent bonus at the end of the year if they've done it right. Yes, people can "learn to manage budgets" but we all know how well that goes.
     
  17. Plutonius macrumors 604

    Plutonius

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    #17
    I figured you were probably investing. My comments are directed at people who don't invest because they are afraid of losing money. I have friends who are college educated and work in technology (i.e. high paying jobs) who put all their money into a savings account. High schools really need to bring back mandatory courses on budgeting / investing.
     
  18. samiwas macrumors 68000

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    #18
    That's a legitimate concern. I know that I, like many, lost a ton during 2008-2009, and the past year or two hasn't been spectacular. That's why I keep a healthy savings account...in case something goes pear-shaped, I have at least something to fall back on.
     
  19. Plutonius macrumors 604

    Plutonius

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    #19
    Yep, you should always have an emergency fund but you still need to invest. If you diversify, you will lose out on some investments but you will make up for it on the other investments. At the very worse, go long in dividend stocks.
     
  20. BeeGood macrumors 68000

    BeeGood

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    #20
    Dave Ramsey and his daughter created a course called "Graduate Survival Guide" which is geared towards teenagers who are about to launch out on their own. I haven't read that book, but my wife and I have read "The Total Money Makeover" so we're teaching our kids the fundamentals we've learned.

    Don't want to offend anyone here, but I don't think I'd trust the schools (or any government entity) to teach my kids about money. Finances just don't work the same in the public sector as they do for the rest of us. :D
     
  21. Plutonius macrumors 604

    Plutonius

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    #21
    Not to tell them where to invest but just basic budgeting and investment. I think it's one of the most important skill sets people need to learn.
     
  22. puma1552 macrumors 601

    Joined:
    Nov 20, 2008
    #22
    Getting married usually bones you on taxes if you have decent income and no kids and no real deductions.

    My wife and I claim married/0 and ended up owing a couple years ago, so I have them take an extra $50 out of every paycheck. This year we got $1800 back, which is really a $600 return.

    The days of multi-thousand dollar returns are behind us unless we have kids, I guess.
     
  23. C DM macrumors Westmere

    Joined:
    Oct 17, 2011
    #23
    Well, technically speaking, days of multi-thousand dollar returns are basically days of overpaying and giving away more of your own money that could have been kept in the previous year.
     
  24. yaxomoxay macrumors 68020

    yaxomoxay

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    Texas
    #24
    adopt a 17yo, feed him on ramen, kick him out on the 18th b-day, claim him on tax return ;)
     
  25. ActionableMango macrumors G3

    ActionableMango

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    Sep 21, 2010
    #25
    Hmmm, I want to save a bunch of money... so I should have a bunch of kids!
     

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