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2019 Withholding & Tax Planning

Posted: Mon Feb 11, 2019 2:27 pm
by Ybsybs
Hi Bogleheads,

I'm trying to figure out what withholding we should do this year for federal and state taxes. We've got a large refund coming this year, and I'd like to get more of that money over the course of the year instead of in March/April next year.

When I completed the IRS withholding calculator, I got a result that we need to INCREASE our withholding to avoid owing around $6k next year. I suspect I fat fingered something and should try again later.

I'm also looking at IRA contributions for the year and choosing between Roth and traditional, and looking at my spouse's 401k which has a Roth and a traditional contribution option.

I used to put the max IRA contribution/12 into a Roth or a traditional IRA to dollar cost average. But I got burned a few years back with variable income being unexpectedly high making a traditional IRA non-deductible. I did all the paperwork to fix that, but I don't want to do a Roth conversion again. So now I set the money aside and at the end of the year make a deductible traditional IRA contribution or a Roth IRA contribution.

I have no crystal ball on the future tax brackets, but looking backwards, we appear to be in our peak earning years and currently have more than half of our retirement accounts as Roth. I'm leaning towards changing the 401k contributions from Roth to Traditional. I'm leaning towards also making the IRA contributions at the end of the year be traditional if they'll be deductible.

Does that sound reasonable to you?

Re: 2019 Withholding & Tax Planning

Posted: Mon Feb 11, 2019 2:45 pm
by aristotelian
The brackets are more or less the same next year, so you should not need to make any major adjustments.

As far as Roth vs Traditional, it is hard to know without more information. Most people end up in a lower (possibly much lower) tax bracket in retirement which makes Traditional advantageous, especially if you retire early and delay Social Security.

Re: 2019 Withholding & Tax Planning

Posted: Mon Feb 11, 2019 2:49 pm
by Stinky
Ybsybs wrote:
Mon Feb 11, 2019 2:27 pm
Hi Bogleheads,

I'm trying to figure out what withholding we should do this year for federal and state taxes. We've got a large refund coming this year, and I'd like to get more of that money over the course of the year instead of in March/April next year.

When I completed the IRS withholding calculator, I got a result that we need to INCREASE our withholding to avoid owing around $6k next year. I suspect I fat fingered something and should try again later.
Something doesn’t add up in these two paragraphs. You say you’re getting a refund in 2019. It would make sense that you need to decrease withholding, not increase it.

Try again.

Re: 2019 Withholding & Tax Planning

Posted: Tue Feb 12, 2019 2:25 pm
by Ybsybs
We are anticipating about double 2018's income in 2019.

But yeah, I also thought there was something wrong with the result I got which is why I intend to recheck all my numbers and try again.

Re: 2019 Withholding & Tax Planning

Posted: Tue Feb 12, 2019 2:27 pm
by Ybsybs
Stinky wrote:
Mon Feb 11, 2019 2:49 pm
Ybsybs wrote:
Mon Feb 11, 2019 2:27 pm
Hi Bogleheads,

I'm trying to figure out what withholding we should do this year for federal and state taxes. We've got a large refund coming this year, and I'd like to get more of that money over the course of the year instead of in March/April next year.

When I completed the IRS withholding calculator, I got a result that we need to INCREASE our withholding to avoid owing around $6k next year. I suspect I fat fingered something and should try again later.
Something doesn’t add up in these two paragraphs. You say you’re getting a refund in 2019. It would make sense that you need to decrease withholding, not increase it.

Try again.
The refund this year is for 2018 taxes. The withholding this year is for 2019 income. I anticipated the one would be similar to the other, but it is looking like our tax situation is significantly different between the two years.

Re: 2019 Withholding & Tax Planning

Posted: Tue Feb 12, 2019 5:14 pm
by Stinky
Ybsybs wrote:
Tue Feb 12, 2019 2:25 pm
We are anticipating about double 2018's income in 2019.
Yep, that would certainly change your tax picture between the two years .....

Re: 2019 Withholding & Tax Planning

Posted: Tue Feb 12, 2019 7:27 pm
by FiveK
Ybsybs wrote:
Mon Feb 11, 2019 2:27 pm
I'm trying to figure out what withholding we should do this year for federal and state taxes.
The personal finance toolbox spreadsheet has a good federal tax capability, and will also do withholding estimates. State tax calculation is probably good for states with simple returns....

Re: 2019 Withholding & Tax Planning

Posted: Wed Feb 13, 2019 10:23 am
by Ybsybs
FiveK wrote:
Tue Feb 12, 2019 7:27 pm
Ybsybs wrote:
Mon Feb 11, 2019 2:27 pm
I'm trying to figure out what withholding we should do this year for federal and state taxes.
The personal finance toolbox spreadsheet has a good federal tax capability, and will also do withholding estimates. State tax calculation is probably good for states with simple returns....
Thanks! I didn't know that existed.