2019 Withholding & Tax Planning

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Ybsybs
Posts: 371
Joined: Thu Aug 28, 2014 4:28 pm

2019 Withholding & Tax Planning

Post by Ybsybs » 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.

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?

aristotelian
Posts: 5249
Joined: Wed Jan 11, 2017 8:05 pm

Re: 2019 Withholding & Tax Planning

Post by aristotelian » Mon Feb 11, 2019 2:45 pm

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.

User avatar
Stinky
Posts: 479
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: 2019 Withholding & Tax Planning

Post by Stinky » 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.
It's a GREAT day to be alive - Travis Tritt

Topic Author
Ybsybs
Posts: 371
Joined: Thu Aug 28, 2014 4:28 pm

Re: 2019 Withholding & Tax Planning

Post by Ybsybs » Tue Feb 12, 2019 2:25 pm

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.

Topic Author
Ybsybs
Posts: 371
Joined: Thu Aug 28, 2014 4:28 pm

Re: 2019 Withholding & Tax Planning

Post by Ybsybs » Tue Feb 12, 2019 2:27 pm

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.

User avatar
Stinky
Posts: 479
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: 2019 Withholding & Tax Planning

Post by Stinky » Tue Feb 12, 2019 5:14 pm

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 .....
It's a GREAT day to be alive - Travis Tritt

User avatar
FiveK
Posts: 6220
Joined: Sun Mar 16, 2014 2:43 pm

Re: 2019 Withholding & Tax Planning

Post by FiveK » 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....

Topic Author
Ybsybs
Posts: 371
Joined: Thu Aug 28, 2014 4:28 pm

Re: 2019 Withholding & Tax Planning

Post by Ybsybs » Wed Feb 13, 2019 10:23 am

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.

Post Reply