IRS 2020 W4 withholding: new calculation method, new form

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Tamales
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IRS 2020 W4 withholding: new calculation method, new form

Post by Tamales » Tue Jan 07, 2020 9:47 pm

Late last year I increased a dollar amount of withholding per paycheck by a fairly large amount so that I would clear the underpayment penalty threshold at the last paycheck for the year. I also had 4 allowances (exemptions) for the year (not because of dependents; just because that's where I've had it for years and I knew the dollar amount I needed to increase relative to the effect 4 exemptions had on the old tax calculation per paycheck). I just went into my employer's online W4 tool, to reduce the extra dollar withholding amount back to a normal amount, only to find it is showing a new W4 form for 2020.

I don't really want to have to read (and shouldn't have to read) 75 pages of new IRS documents to figure out how to get essentially the same federal tax withheld as in 2019, so I'm hoping someone can steer me in the right direction. It seems if I do nothing (i.e. don't file a 2020 W4), I lose the effect of the tax withholding due to the previous 4 allowances, but the dollar amount of extra withholding that I had set at the end of 2019 remains.

Correct me if I'm wrong, but the new form presumes 0 exemptions as the starting point, and you can no longer declare exemptions except for dependents. So (I think) I have to make my adjustments (to get essentially the same tax withholding outcome as I had in 2019) entirely through a dollar (per paycheck) entry in "Line 4(c) Extra Withholding," and leave everything else zero.

Is that correct so far?

And with 4 allowances last year, at $4300 each (according to line 1k of the new W4 form), I'd have 4300x4=$17200, divided by 24 pay periods per year = $716.67 per pay period, and let's say the per-payperiod average of my total additional dollar witholding amounts for 2019 was $1000.

So, for my 2020 W4 to result in approximately the same total tax withheld by the end of 2020, I would put $1716.67 in W4 line 4(c) and leave everything else blank. Is that correct?

Count of Notre Dame
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Count of Notre Dame » Tue Jan 07, 2020 9:48 pm

Interested as well!

Topic Author
Tamales
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Tamales » Tue Jan 07, 2020 10:06 pm

I should probably add that I'm not expecting a "set it and forget it" number, because I know I'm going to have to bump the dollars per check withholding number up later in the year because I have a large number of unpredictable income adjustments to make. I just want an initial number that will be in the right ball park, so that it has the same net effect as the 2019 W4 form, until August or so, when I can begin increasing it as the unknown numbers become known.

rkhusky
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by rkhusky » Tue Jan 07, 2020 10:26 pm

At my work I never filled out a W4 after the first one. I just told HR how many exemptions that I wanted, which I changed every year or so to ensure that I owed some at tax time. I was able to figure it out from taxable income, withholding allowance, and tax brackets.

For OP, it does look your method should yield the same amount as last year. deleted per Katietsu's post below. Also, see my post below.
Last edited by rkhusky on Wed Jan 08, 2020 10:53 am, edited 4 times in total.

central-pa
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by central-pa » Tue Jan 07, 2020 10:26 pm

I started down the rabbit-hole of IRS publications, regulations, etc., just a few days ago. But then I found the IRS W-4 estimator here...

https://apps.irs.gov/app/tax-withholding-estimator

It doesn't take that long to do, but you'll need your most recent paystub and information on income, dependents, deductions, etc. I guesstimated based on last year's 1040. It ends up with a projection of your total taxes based on current withholding, and suggested amounts to put on the new W-4 form. It even has a link to an editable PDF with the suggested amount pre-filled.

If you have lumpy income during the year, it may be better to make estimated tax payments for the lumpy parts. Though I will admit I hate doing estimated payments, since we seem to be late on at least one payment every year. I hope this year we can avoid both the estimated payments and underpayment penalties!

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Tamales
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Tamales » Tue Jan 07, 2020 10:52 pm

central-pa: If what I described above is correct, it's actually pretty simple (which is why I question it--IRS forms are never simple). And for people with just regular, consistent paychecks and nothing else during the year you could probably take your fed tax withheld from your last 2019 paycheck, assuming you are satisfied with that amount, divide by the number of paychecks during the year, and enter that amount on 2020 Form W4 line 4(c) and nothing else. But I'm not sure that I'm interpreting it right.

central-pa
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by central-pa » Tue Jan 07, 2020 11:04 pm

Well, maybe. Except that Line 4(c) is for "additional withholding."

To be honest, now I'm not sure how the numbers in the estimator are determined. It shows my expected tax withholding, expected tax liability, and the difference, but the recommended additional withholding isn't the difference divided by the number of pay periods. Maybe this thing isn't so great after all...?

Katietsu
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Katietsu » Tue Jan 07, 2020 11:33 pm

Tamales wrote:
Tue Jan 07, 2020 9:47 pm


Correct me if I'm wrong, but the new form presumes 0 exemptions as the starting point, and you can no longer declare exemptions except for dependents. So (I think) I have to make my adjustments (to get essentially the same tax withholding outcome as I had in 2019) entirely through a dollar (per paycheck) entry in "Line 4(c) Extra Withholding," and leave everything else zero.

Is that correct so far?

And with 4 allowances last year, at $4300 each (according to line 1k of the new W4 form), I'd have 4300x4=$17200, divided by 24 pay periods per year = $716.67 per pay period, and let's say the per-payperiod average of my total additional dollar witholding amounts for 2019 was $1000.

So, for my 2020 W4 to result in approximately the same total tax withheld by the end of 2020, I would put $1716.67 in W4 line 4(c) and leave everything else blank. Is that correct?
I do not think this is correct. First, your allowances were worth a reduction in your income of $17200 or $716.67. If, in 2017, you were in the 25% tax bracket, this would only have reduced your withholding per paycheck by $716.67*.25 or $179 per paycheck in 2017. However, this did not directly apply in 2018. So there was some kind of estimating process put in place. I do not remember exactly how it worked.

Second, when you lose the 4 allowances and do not replace it, your withholding will automatically increase thus your extra withholding would need to decrease to get the same result. So, I would guess that your extra withholding only needs to be a couple hundred dollars less than $1000, about half of your estimate.

I just used the IRS tool a couple of days ago. It works well, took about 5 minutes, and did not require reading 75 pages. I would consider giving it a try.

Falcon2018
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Falcon2018 » Wed Jan 08, 2020 9:02 am

I found this excel file from IRS especially helpful...

https://www.irs.gov/businesses/small-bu ... -employers

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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Jack FFR1846 » Wed Jan 08, 2020 9:08 am

Keeping mine as it is. 0 exemptions, with hold at single rate. $100 extra taken out every pay period (26). Even at that, I send in estimated tax payments every quarter.
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1130Super
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by 1130Super » Wed Jan 08, 2020 9:15 am

I did the same thing late last year, I always make sure that I owe taxes instead of getting a return so that in the small chance someone files a faulty return in my name I won’t get screwed

rkhusky
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by rkhusky » Wed Jan 08, 2020 10:51 am

Tamales wrote:
Tue Jan 07, 2020 9:47 pm
And with 4 allowances last year, at $4300 each (according to line 1k of the new W4 form), I'd have 4300x4=$17200, divided by 24 pay periods per year = $716.67 per pay period, and let's say the per-payperiod average of my total additional dollar witholding amounts for 2019 was $1000.

So, for my 2020 W4 to result in approximately the same total tax withheld by the end of 2020, I would put $1716.67 in W4 line 4(c) and leave everything else blank. Is that correct?
The withholding allowance is subtracted from your income, while the extra withholding is extra tax. The withholding allowance should be multiplied by your tax rate to arrive at the tax you would pay (e.g. 0.22 x 4 x $4300 = $3780). This can be complicated by your withholding allowance spanning two tax brackets.

Plus it's not clear how employers are actually going to withhold from your check. Pub P-15t is mess (https://www.irs.gov/pub/irs-pdf/p15t.pdf). Probably best to figure out what you will owe for 2020 and arrange for that amount to be withheld from your check as a flat amount without any allowances.

SuzBanyan
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by SuzBanyan » Wed Jan 08, 2020 1:05 pm

rkhusky wrote:
Wed Jan 08, 2020 10:51 am
Tamales wrote:
Tue Jan 07, 2020 9:47 pm
And with 4 allowances last year, at $4300 each (according to line 1k of the new W4 form), I'd have 4300x4=$17200, divided by 24 pay periods per year = $716.67 per pay period, and let's say the per-payperiod average of my total additional dollar witholding amounts for 2019 was $1000.

So, for my 2020 W4 to result in approximately the same total tax withheld by the end of 2020, I would put $1716.67 in W4 line 4(c) and leave everything else blank. Is that correct?
The withholding allowance is subtracted from your income, while the extra withholding is extra tax. The withholding allowance should be multiplied by your tax rate to arrive at the tax you would pay (e.g. 0.22 x 4 x $4300 = $3780). This can be complicated by your withholding allowance spanning two tax brackets.

Plus it's not clear how employers are actually going to withhold from your check. Pub P-15t is mess (https://www.irs.gov/pub/irs-pdf/p15t.pdf). Probably best to figure out what you will owe for 2020 and arrange for that amount to be withheld from your check as a flat amount without any allowances.
I agree that the whole thing is a mess. I had a final paycheck+ severance paid to me earlier this week and I could not figure out how to fill out the W-4. Luckily, I was able to give the company the amount I wanted withheld.

motorcyclesarecool
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by motorcyclesarecool » Sat Jan 11, 2020 10:23 pm

The new Withholding Estimator looks better than Tax Caster.

I’m not sure I understand the new W-4 though. I just put the total I want withheld in 4(c)? After years of thinking in exemptions, this feels strange. If the IRS is simplifying the W-4, this is a good move.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

masteraleph
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by masteraleph » Sun Jan 12, 2020 12:40 am

Had to fill it out recently- was actually rather annoyed. I understand why they're doing it this way, but they've made the numbers even more opaque than they previously were.

It would be really, really nice if they just gave an opportunity to set your withholding and be done with it.

masteraleph
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by masteraleph » Sun Jan 12, 2020 12:42 am

motorcyclesarecool wrote:
Sat Jan 11, 2020 10:23 pm
The new Withholding Estimator looks better than Tax Caster.

I’m not sure I understand the new W-4 though. I just put the total I want withheld in 4(c)? After years of thinking in exemptions, this feels strange. If the IRS is simplifying the W-4, this is a good move.
No, 4c is the additional amount. They're attempting to do some of your withholding calculations for you by asking for things like dependents (to deal with the child tax credit in the W4), and to try and set the amount for spouses with multiple jobs. The result is a very one size fits all answer.

flah
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by flah » Sun Jan 12, 2020 1:33 am

Why can't you enter the amount you want withheld per pay period in 4(c) and the amount of whole year salary minus standard deduction into 4(b)? Other than getting flagged for review by the IRS of course.

eob616
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by eob616 » Sun Jan 12, 2020 8:34 am

PSA, people should check their withholding, even if they weren't expecting anything to change.

Based on the wording of the new form (the instructions tell payroll administrators to do X if the employee hasn't filed a new form W-4 in 2020, but Y if they have), I expected my 2020 federal withholding to stay stable with where it was in 2019. However, the first 2020 check just showed up, and my withholding dropped by 8% without my having filled out a new form. My last-filed W-4 had a single allowance, but the new calculation bumped me to the equivalent of what had been two allowances.

It would have been easy to miss if I had confused the net pay increase with a cost of living raise that'll hit with the next paycheck.

NYCaviator
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IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 12:22 pm

[Thread merged into here, see below. --admin LadyGeek]

My spouse and I found out we are receiving a very large tax return this year, which means we paid way too much in taxes last year. I went to fill out a new W4 to adjust withholding, and see that it has been revamped to be "simpler." It appears to be anything but...

My compensation structure is such that the amount I'm paid each pay period fluctuates. When I go through the new calculator, and input my last paycheck, it shows that I should withhold a substantial additional amount each pay period. This makes absolutely no sense when I am already paying too much in taxes based upon my return.

Has anyone else run into problems with the new W4 and figured out how to fill it out accurately?

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Re: IRS new W4... a nightmare for anyone else?

Post by JGoneRiding » Sun Jan 12, 2020 12:27 pm

I haven't tried for this year. But for calculate I would act like you are trying to figure out how much to withhold for last years 12/31 check.

The tiny bit you might have been paid so far this year esp if on the low side is going to mess up the calculator.

Or you can do my fast and dirty way. Just add one more dependent to your w4 for last year and then figure out if you are close in July

Small Savanna
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Re: IRS new W4... a nightmare for anyone else?

Post by Small Savanna » Sun Jan 12, 2020 12:33 pm

Instead of dutifully following the instructions on the form, do your own best estimate of your taxes and then pencil whip the form into submission.

NYCaviator
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Re: IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 12:40 pm

JGoneRiding wrote:
Sun Jan 12, 2020 12:27 pm
I haven't tried for this year. But for calculate I would act like you are trying to figure out how much to withhold for last years 12/31 check.

The tiny bit you might have been paid so far this year esp if on the low side is going to mess up the calculator.

Or you can do my fast and dirty way. Just add one more dependent to your w4 for last year and then figure out if you are close in July
That's what I did, and the calculator shows I am overpaying, but then it says that I should enter $XXX in the additional withholding box. So that's what is so confusing.

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Thrifty Femme
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Re: IRS new W4... a nightmare for anyone else?

Post by Thrifty Femme » Sun Jan 12, 2020 12:42 pm

Turbotax has a w4 calculator. You can use your last pay stub to create a simulated w2.

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Re: IRS new W4... a nightmare for anyone else?

Post by livesoft » Sun Jan 12, 2020 12:43 pm

If you get a bonus, then it doesn't matter what the W-4 says since a minimum of 22% is going to be withheld. My spouse adjusted her 2019 tax withholding to withhold $0.00 since that's what we expected to pay. Then the 22% tax on a bonus will result in a huge refund because there was no way to avoid it.
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NYCaviator
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Re: IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 12:45 pm

This is the first year we are filing jointly, so that could have something to do with it.

I took my earnings from 2019 and divided the total federal tax by the number of pay periods. The IRS calculator still shows me getting a large refund, so when I change it so that the refund is substantially less, it "prefills" a W4 with additional withholding in the box. I don't understand why I'd want additional withholding if the iRS is already saying that I am overpaying?

btenny
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Re: IRS new W4... a nightmare for anyone else?

Post by btenny » Sun Jan 12, 2020 12:46 pm

It sounds like things have not improved in 30 years. That form and system is just not very accurate from my experience. I used to take 6 dependents on my W4 way back when. I had investments and rental property and my wife worked. She took 3 dependents on her W4. We had two kids. These deductions got us slightly under taxes owed. But I would set down in October or November and calculate our earnings and make a best guess on taxes. Then I would make a one time large W4 deduction ($2K or so) for December. This got our taxes real close each year so I owed a little or had a small refund. I used that system for many years in the 90s before I retired. It met all the rules back then.

Good Luck.

NYCaviator
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Re: IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 12:49 pm

btenny wrote:
Sun Jan 12, 2020 12:46 pm
It sounds like things have not improved in 30 years. That form and system is just not very accurate from my experience. I used to take 6 dependents on my W4 way back when. I had investments and rental property and my wife worked. She took 3 dependents on her W4. We had two kids. These deductions got us slightly under taxes owed. But I would set down in October or November and calculate our earnings and make a best guess on taxes. Then I would make a one time large W4 deduction ($2K or so) for December. This got our taxes real close each year so I owed a little or had a small refund. I used that system for many years in the 90s before I retired. It met all the rules back then.

Good Luck.
I may need to try that this year. I just don't want to either owe a huge amount or have more than I need withheld.

moarcoffee
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by moarcoffee » Sun Jan 12, 2020 1:12 pm

eob616 wrote:
Sun Jan 12, 2020 8:34 am
PSA, people should check their withholding, even if they weren't expecting anything to change.

Based on the wording of the new form (the instructions tell payroll administrators to do X if the employee hasn't filed a new form W-4 in 2020, but Y if they have), I expected my 2020 federal withholding to stay stable with where it was in 2019. However, the first 2020 check just showed up, and my withholding dropped by 8% without my having filled out a new form. My last-filed W-4 had a single allowance, but the new calculation bumped me to the equivalent of what had been two allowances.

It would have been easy to miss if I had confused the net pay increase with a cost of living raise that'll hit with the next paycheck.
If you're a federal employee, it looks like NFC had an error on their end with PP26 withholding: https://www.nfc.usda.gov/ClientServices ... ED_TAX.pdf

csmath
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by csmath » Sun Jan 12, 2020 2:06 pm

I just went through a similar exploration over the last few days.

My Payroll department is clueless and said that they don't know how to do anything but plug the results of the new W4 into their "program". They cannot tell me how to use the form to increase my annual withholding a certain amount because they don't give tax advice lol. They also said that I could resubmit the W4 as often as I like and if I know how much I want withheld each paycheck that I could keep fiddling with the numbers and re-submit until I get I amount withheld that I want. No, I'm not kidding, that is what my employer's Payroll Department is telling me.
Tamales wrote:
Tue Jan 07, 2020 9:47 pm
Correct me if I'm wrong, but the new form presumes 0 exemptions as the starting point, and you can no longer declare exemptions except for dependents. So (I think) I have to make my adjustments (to get essentially the same tax withholding outcome as I had in 2019) entirely through a dollar (per paycheck) entry in "Line 4(c) Extra Withholding," and leave everything else zero.
EDIT: I no longer believe the below information is correct. It seems that since there are no longer exemptions, it does indeed wipe out all old exemptions and reset using the new withholding method.

I do not believe this is correct. In fact, when I used the online estimator, printed out the pre-filled W4 form and then followed the direction, I ended up with the following.

The ONLY thing on the form that was filled out was this:
  • 1a) Name, Address, etc
  • 1b) SSN
  • c) Filing status (MFJ)
  • 3) A # that was pre-filled via online calculator. It was not the sum of the amounts "above" as directed on the form because they were blank. (more on this later)
  • 5) Sign and Date
The one seemingly random pre-filled number with everything else blank was confusing until I started reading the directions and realized that almost all of the form in optional. You can use the online estimator for a suggested best estimate and then just print the pre-filled form. It appears as though the new W4 doesn't touch any exemptions at all and instead just offsets our current exemptions with a flat adjustment. The flat adjustment can be entered into step#3.

Please someone correct me if this is wrong. It starts to make sense why my Payroll Dept. wasn't able to help me because in the conversation I told them that all I wanted to do was to reduce my exemptions by 1. The whole process doesn't seem very transparent at all.

If I understand it correctly, if you want to increase your withholding by $1,000 more than at your previous rate, you put $1,000 in step#3 and then submit it. I may have this all wrong but my results sure seemed say that this is how it works now.
Last edited by csmath on Sun Jan 12, 2020 9:58 pm, edited 2 times in total.

epargnant
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by epargnant » Sun Jan 12, 2020 2:08 pm

Is $1716.67 the total amount of tax you think should be taken out each paycheck? (Forgive me if I misunderstood that). If it is, I wouldn't put that amount on line 4c, because 4c says ADDITIONAL withholding, not total withholding. I think they are going to take out whatever their standard calculations say you owe based on 0 dependents and the standard deduction, and then they will ADD 4c.

Instead of being able to claim more/less allowances, this new form has you add the additional deductions you intend to take on your 2020 taxes (over the standard deduction), and add in approximate non W2 income.

I would probably fill it out as it is intended- put your dependents, itemized deductions above the standard (or 0 if you'll take the standard deduction), and any interest/dividends/other income you expect to receive. Then see how much they take out in January, and adjust as necessary going forward. You should be allowed to re-submit a W4 as often as you want. It's early in the year which is good because you have time to play around with it.

flyninjasquirrel
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Re: IRS new W4... a nightmare for anyone else?

Post by flyninjasquirrel » Sun Jan 12, 2020 2:12 pm

It may be helpful to know how the IRS is withholding taxes now compared to previously. They HAD to change the W4 because the personal exemptions are gone now. If you reference IRS Publication 15-T for 2020 you can see how it's done. Basically they take your monthly pay and calculate how much annual tax you would owe if you got paid that for the whole year. They then divide it again by your pay periods to get your monthly tax owed. Since this is calculated every time you get paid your tax will fluctuate based on how much you got paid that paycheck. However, it does not take into account your spouse's pay unless you go through the myraid of confusing ways that they have listed to calculate this, which includes the estimator. But in the end you will have to adjust (increase) your withholding, her withholding, or both to meet your tax liability for your JOINT income.

Really the easiest way to do this is to just estimate your total tax liability for the year. If you've ever done your own taxes on paper, this is easy to do - just plug in the 2020 numbers and your estimates for your joint income this year. Having gone through Publication 15-T you have an idea of what your monthly withholding is going to be. If you draw that out for the year you know what the IRS is going to withhold from your paycheck. If it is less than what your estimated annual tax liability is then you need to tell them to withhold extra from your paycheck on Step 4c of your W4. Midway through the year go back and make sure your withholdings are keeping up with your estimated tax liability for the year. If they aren't you gotta modify your W4 to compensate.

zrail
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by zrail » Sun Jan 12, 2020 2:12 pm

If you want to know exactly how your employer calculates your withholding for a given W-4 IRS pub 15-T has a worksheet on page 5.

https://www.irs.gov/pub/irs-pdf/p15t.pdf

EnjoyIt
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Re: IRS new W4... a nightmare for anyone else?

Post by EnjoyIt » Sun Jan 12, 2020 2:18 pm

NYCaviator wrote:
Sun Jan 12, 2020 12:49 pm
btenny wrote:
Sun Jan 12, 2020 12:46 pm
It sounds like things have not improved in 30 years. That form and system is just not very accurate from my experience. I used to take 6 dependents on my W4 way back when. I had investments and rental property and my wife worked. She took 3 dependents on her W4. We had two kids. These deductions got us slightly under taxes owed. But I would set down in October or November and calculate our earnings and make a best guess on taxes. Then I would make a one time large W4 deduction ($2K or so) for December. This got our taxes real close each year so I owed a little or had a small refund. I used that system for many years in the 90s before I retired. It met all the rules back then.

Good Luck.
I may need to try that this year. I just don't want to either owe a huge amount or have more than I need withheld.
I am self employed, my income is very variable and I do quarterly estimated taxes. I usually find myself overpaying Q1, Q2, and Q3 and then when I actually calculate it out, I end up paying nothing in Q4 getting a bit of a tax deduction on filing my return.

On the one hand I hate the idea of giving the government a free loan. On the other I hate the idea of paying a penalty and owing interest even if that amount might be relatively small. So, I choose the free government loan as the worse of two evils.

NYCaviator
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Re: IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 5:08 pm

If anyone has filled out a new W4, do you know how you reduce the amount of taxes withheld?

Topic Author
Tamales
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Tamales » Sun Jan 12, 2020 5:47 pm

OP here. I just left my W4 as it stood 12/31/19, and when I get my first 2020 check next week I'll see if I can figure out how they arrived at the numbers. Before my next check I suppose I'll submit a W4 with no entry anywhere, and some supplemental amount in 4c. See what happens with that. Trial and error from there.

I don't think the IRS calculator will work for me. Besides regular paychecks I have anywhere from 12-15 additional paychecks, some of which are taxed at the supplemental income flat rate, and some are not taxed at all, and all of them are relatively unknown values depending on company stock and company profits and other things. Plus untaxed CD interest and other market income to add to the mix, and I don't think I should have to tell my employer those numbers and I ought to be able to blend them into line 4c.

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Re: IRS new W4... a nightmare for anyone else?

Post by kaneohe » Sun Jan 12, 2020 6:23 pm

NYCaviator wrote:
Sun Jan 12, 2020 5:08 pm
If anyone has filled out a new W4, do you know how you reduce the amount of taxes withheld?
haven't filled one out but looks like increasing dependents/deduction would reduce w/h.

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Re: IRS new W4... a nightmare for anyone else?

Post by SimonJester » Sun Jan 12, 2020 6:41 pm

NYCaviator wrote:
Sun Jan 12, 2020 5:08 pm
If anyone has filled out a new W4, do you know how you reduce the amount of taxes withheld?
Step 3 by adding amounts to the credits section

...
You can also include other tax credits in this step, such as education tax credits and the foreign tax credit. To do so, add an estimate of the amount for the year to your credits for dependents and enter the total amount in Step 3. Including these credits will increase your paycheck and reduce the amount of any refund you may receive when you file your tax return
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by epargnant » Sun Jan 12, 2020 7:18 pm

It does get complicated with variable income plus future bonuses & RSUs (of unknown value) taxed at 22%. I played around with the IRS calculator a bit as well as read through some of the employer IRS withholding documents. There's one very interesting thing that stuck out:

The online calculator had me increase the amount on Line 3 by a considerable amount to take into account that bonuses would be taxed at the 22% rate. So Line 3 will be much greater than the $6000 it would otherwise be for our 3 kids. The W4 makes it seems like Line 3 only takes into account the child credit, but it can actually include any tax credit you think you'll get, as well as help decrease withholding if you're expecting high future withholding from bonuses/RSUs.

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Re: IRS new W4... a nightmare for anyone else?

Post by epargnant » Sun Jan 12, 2020 7:24 pm

I just posted this on another thread, but I think it applies here too:

Line 3 can be increased regardless of how many dependents and/or credits you have.

The online IRS calculator https://apps.irs.gov/app/tax-withholding-estimator/ had me increase the amount on Line 3 by a considerable amount to take into account that bonuses would be taxed at the 22% rate. So Line 3 will be much greater than the $6000 it would otherwise be for our 3 kids. The W4 makes it seems like Line 3 only takes into account the child credit, but it can actually include any tax credit you think you'll get (as SimonJester said above), as well as help decrease withholding if you're expecting high future withholding from bonuses/RSUs.

For employers, they are supposed to take the amount on Line 3, divide by the number of pay periods, and reduce your tax by that amount. So It's a very direct effect. You put $6000 on Line 3, and if you're paid monthly, they will withhold $500 less.

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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by csmath » Sun Jan 12, 2020 8:19 pm

The thing I don't understand is that the online estimator said I needed to withhold MORE but the pre-filled W4 that it spit out added a number to line 3... not line 4c. Why would this have been added to line 3 instead of line 4 which clearly says "extra withholding"?

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Re: IRS new W4... a nightmare for anyone else?

Post by NYCaviator » Sun Jan 12, 2020 8:41 pm

epargnant wrote:
Sun Jan 12, 2020 7:24 pm
I just posted this on another thread, but I think it applies here too:

Line 3 can be increased regardless of how many dependents and/or credits you have.

The online IRS calculator https://apps.irs.gov/app/tax-withholding-estimator/ had me increase the amount on Line 3 by a considerable amount to take into account that bonuses would be taxed at the 22% rate. So Line 3 will be much greater than the $6000 it would otherwise be for our 3 kids. The W4 makes it seems like Line 3 only takes into account the child credit, but it can actually include any tax credit you think you'll get (as SimonJester said above), as well as help decrease withholding if you're expecting high future withholding from bonuses/RSUs.

For employers, they are supposed to take the amount on Line 3, divide by the number of pay periods, and reduce your tax by that amount. So It's a very direct effect. You put $6000 on Line 3, and if you're paid monthly, they will withhold $500 less.
This is interesting. When I do the calculator online it shows me overpaying by $X so when I adjust it so that it’s closer to 0, it tells me to add $Y to additional withholding in line 4(c). That makes no sense to me because why would I withhold more if I’m already paying too much?

It doesn’t suggest I put anything in line 3, as we have no dependents.

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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by epargnant » Sun Jan 12, 2020 9:14 pm

I just looked at the withholding calculator again, and I have the same problem as csmath... it says we need to withhold more, but the pre-filled W4 increased Line 3. It makes me doubt the whole calculator. But, it is interesting that it tells me to "Enter $X,XXX for credits and other reductions to annual withholding (Line 3 on Form W-4)." Another affirmation that Line 3 is NOT just for dependents, it's also for other credits and "other reductions."

I've been looking at the employer tax guide https://www.irs.gov/pub/irs-pdf/p15t.pdf and it's illuminating. If you go to Section 4, there's a worksheet to figure out your withholding. I think it helps to understand how they are going to figure out the withholding, and then you can adjust the W4 accordingly.
This is the basic math for those interested:
- It takes W4 Line 4a (additional income), divides it by the number of pay periods, and adds that to your earnings for the pay period.
- Then it takes W4 Line 4b (deductions over the standard deduction), divides by the number of pay periods, and subtracts it from your earnings.
- Then you take that adjusted number & look at the tax withholding tables (based on filing status, how often you are paid, and if you/spouse have another job).This tells you how to calculate the withholding amount, and you can see what tax bracket you are in.
- It then takes your Line 3 amount, divides it by the number of pay periods, and subtracts that amount from your tax withholding.
- Lastly it adds in whatever you put on line 4c (additional withholding).

I also did the math using Section 1 (for automated payroll systems) and it comes up with the same withholding amount as Section 4, the math is just a little different. Section 2 uses wage brackets (no calculating necessary) that you can use if your salary is under $8300/month, with similar results as Section 4.

If you do the withholding math yourself, remember to subtract pre-tax things like 401Ks and HSAs before doing the worksheet, if you employer takes those out for you.

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Re: IRS new W4... a nightmare for anyone else?

Post by epargnant » Sun Jan 12, 2020 9:16 pm

Someone else had that same strange problem with the tax calculator (actually the direct opposite of you):
viewtopic.php?f=2&t=299942#p4950057

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Re: IRS new W4... a nightmare for anyone else?

Post by Goal33 » Sun Jan 12, 2020 9:26 pm

livesoft wrote:
Sun Jan 12, 2020 12:43 pm
If you get a bonus, then it doesn't matter what the W-4 says since a minimum of 22% is going to be withheld. My spouse adjusted her 2019 tax withholding to withhold $0.00 since that's what we expected to pay. Then the 22% tax on a bonus will result in a huge refund because there was no way to avoid it.
Contributing to a 401k? Maybe she can play with the compensation source for contributions and get around it. Maybe contribute 100% on bonuses and less on base pay. Just an idea.
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by LadyGeek » Sun Jan 12, 2020 9:42 pm

I merged NYCaviator's thread into a similar discussion.
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by NYCaviator » Sun Jan 12, 2020 10:56 pm

I think the calculator is just flat out wrong. I ran numbers based on my wife and I’s pay from last year and what we paid it taxes. It says based upon what I put in, I would expect a refund of $X,XXX.00 based upon an overpayment in taxes. You can move the slider so that the refund is 0 or close to 0.

At that point it says “to get your desired refund, you need to pay $YYYY per pay period which is $ZZZ less than you are paying now”. Scroll down and it says I need to enter additional withholding $AAA per pay period. I have no idea where they came up with $AAA.

This makes absolutely no sense. If I am paying $ZZZ too much each check, why would I want additional withholding?

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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Tamales » Sun Jan 12, 2020 11:19 pm

I think they made the tax tables in 2020 Pub 15t in annual income form to make it less obvious that all the bracket thresholds are reduced compared to the comparable table in 2019 Pub 15-A (which is in per-paycheck values).
Or at least for the tables of relevance to me, it takes less money in 2020 to hit the next higher bracket in all cases. I think that translates to higher taxes for everyone, for the same income compared to 2019.

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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by MrBeaver » Sun Jan 12, 2020 11:49 pm

I'm in this strange warp zone where my mandatory 22% holding is on roughly 35% of my gross pay, yet my actual average tax rate is <4% because I'm within the 12% bracket and have a fair number of deductions & credits. Literally, roughly 3x my annual tax liability is forcibly withheld by the middle of February. Grrr...

It used to be easy to 'withhold nothing' by just claiming a large number of exemptions. What's the escape hatch on the new form? Just put a high number in line 3?

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Re: IRS new W4... a nightmare for anyone else?

Post by livesoft » Mon Jan 13, 2020 7:17 am

Goal33 wrote:
Sun Jan 12, 2020 9:26 pm
livesoft wrote:
Sun Jan 12, 2020 12:43 pm
If you get a bonus, then it doesn't matter what the W-4 says since a minimum of 22% is going to be withheld. My spouse adjusted her 2019 tax withholding to withhold $0.00 since that's what we expected to pay. Then the 22% tax on a bonus will result in a huge refund because there was no way to avoid it.
Contributing to a 401k? Maybe she can play with the compensation source for contributions and get around it. Maybe contribute 100% on bonuses and less on base pay. Just an idea.
Thank you for a very interesting idea. I don't think it would be workable though because she must make sure to be on track to max out 401(k) through payroll deduction by year-end, so by December 25 or so, she is almost at the 401(k) contribution limit by then. But I will try something out next December. Thanks!
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Re: IRS 2020 W4 withholding: new calculation method, new form

Post by Tamarind » Mon Jan 13, 2020 7:21 am

I suggest using the withholding estimator after your first paycheck of the year, then updating.

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