Did I Pencil Whip My W-4 Correctly?

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Nearly A Moose
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Did I Pencil Whip My W-4 Correctly?

Post by Nearly A Moose » Tue Jan 14, 2020 11:17 am

I'm going to add my voice to the chorus singing that the new W-4 form is ... not especially helpful. I'm looking for a quick check on whether I correctly pencil-whipped the form to reach my goal, which is to get my total withholdings reasonably close to my anticipated federal tax liability. Did I get this right?

Situation: Married filing jointly. Both spouses work. Total household income is above $500k, but disparate (think 70/30) (which is why I can't just check the "split it" box). We itemize.

What I did: I ran a tax projection for 2020 based on expected numbers. I used the MMM 2020 Case Study Spreadsheet found here on the Bogleheads Tools and Calculators page, as I've found past versions to be pretty accurate. That spreadsheet has a W-4 calculator section that gave me an anticipated total federal income tax as well as the amount that would be withheld by default from our two pay salaries (on total). I subtracted the amount that would be withheld from the total tax, which gave me "X", which should be the total amount that we collectively would have under-withheld if we don't make any W-4 adjustments. I will compare this to my actual 2019 federal return once that's complete and also do a dummy return and will revisit if it's grossly off.

I submitted updated W-4s for my wife and me. For each, I marked in Box 1c that we are married filing jointly. I left boxes 2 and 3 blank. In box 4c ("Extra Withholding"), I entered in each of our W-4 a share of "X" spread across the number of pay periods for each of us (i.e., I entered a monthly amount for me and a biweekly amount for my wife). I divided "X" up more or less as I felt like it, but in the end, the sum of the extra withholdings across all the pay checks will equal "X" at the end of the year. I left the other Box 4 items blank.

So, did I do this correctly? (If I did, this seems much easier than going through the actual form...)
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

rkhusky
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Re: Did I Pencil Whip My W-4 Correctly?

Post by rkhusky » Tue Jan 14, 2020 12:07 pm

Seems reasonable if the spreadsheet was accurate in estimating each of your default withholdings.

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willthrill81
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Re: Did I Pencil Whip My W-4 Correctly?

Post by willthrill81 » Tue Jan 14, 2020 12:09 pm

Nearly A Moose wrote:
Tue Jan 14, 2020 11:17 am
I'm going to add my voice to the chorus singing that the new W-4 form is ... not especially helpful.
Funny enough, I've never heard anyone describe anything the IRS has ever produced as being especially helpful.
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Sahara
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Re: Did I Pencil Whip My W-4 Correctly?

Post by Sahara » Wed Jan 15, 2020 6:06 pm

It’s important to note that when you submit a 2020 W-4 with extra withholding in line 4c, it will add that amount to the “default” tax withholding for you which depends upon your filing status and whether there are other lines in the W4 filled in. You won’t have ONLY the amount on line 4c withheld.

This spreadsheet (https://www.irs.gov/businesses/small-bu ... -employers) would, theoretically, provide the base withholding for you. You could also look at what is deducted from the 1st paycheck of 2020 if that was calculated prior to the new W-4 or explore PUB 15T.

An employer or payroll company's software may or may not match the amount calculated in the above spreadsheet. The one I use does not. 

In the software, instead of the old method of entering exemptions/allowances, you provide the filing status and pay frequency. Then you enter the amounts from Form W-4 lines 3, 4a, 4b, and 4c into the software and it calculates the withholding. My point is, some of this is dependent upon the accuracy of the software being used to process the payroll.

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FiveK
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Re: Did I Pencil Whip My W-4 Correctly?

Post by FiveK » Thu Jan 16, 2020 2:03 am

Nearly A Moose wrote:
Tue Jan 14, 2020 11:17 am
What I did: I ran a tax projection for 2020 based on expected numbers. I used the MMM 2020 Case Study Spreadsheet found here on the Bogleheads Tools and Calculators page, as I've found past versions to be pretty accurate.
...
So, did I do this correctly? (If I did, this seems much easier than going through the actual form...)
Seems reasonable. It would be interesting to hear how your actual 2019 tax calculation and your actual January 2020 withholding compare with that spreadsheet's numbers. I've also found them accurate in the past; it would be good to know if they remain so.

blackholescion
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Re: Did I Pencil Whip My W-4 Correctly?

Post by blackholescion » Thu Jan 16, 2020 6:45 am

Did you try using the online wizard from the IRS? It’s relatively straightforward.

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

motorcyclesarecool
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Re: Did I Pencil Whip My W-4 Correctly?

Post by motorcyclesarecool » Thu Jan 16, 2020 6:59 am

My payroll processor’s online portal only allows me to enter multiples of $500 in Box 3. :annoyed
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wolf359
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Re: Did I Pencil Whip My W-4 Correctly?

Post by wolf359 » Thu Jan 16, 2020 7:03 am

blackholescion wrote:
Thu Jan 16, 2020 6:45 am
Did you try using the online wizard from the IRS? It’s relatively straightforward.

https://apps.irs.gov/app/tax-withholding-estimator
I'm wrestling with it. It is very easy and straightforward to use, but when I turned in the forms that it generated, I got mixed results.

One employer increased the withholding amount. The other decreased the withholding amount. (Both were supposed to decrease). Neither did it by the amount the IRS projection stated they should.

One thing that is confusing is that form doesn't have you put in the amount you want withheld. You put in a different number, and it's supposed to get calculated correctly from there. Both employers may be using different formulae to calculate.

Another complicating factor is a 2-income household has a different calculation. That may mean I should modify the form after the IRS pre-filled it in for me.

Sahara
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Re: Did I Pencil Whip My W-4 Correctly?

Post by Sahara » Thu Jan 16, 2020 7:35 am

Once you determine the additional amount you want withheld overall, you can allocate it across multiple jobs as you prefer. Due to the issues with employer calculations and software, here is how I might handle it.

Calculate the amount you want per period from each employer. Call each employer, ask them to calculate the amount withheld with no modifications. Subtract that amount from the total you want withheld. What remains is the amount you would ask them to enter as your extra withholding.

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Re: Did I Pencil Whip My W-4 Correctly?

Post by LadyGeek » Thu Jan 16, 2020 9:55 am

Nearly A Moose wrote:
Tue Jan 14, 2020 11:17 am
I'm going to add my voice to the chorus singing that the new W-4 form is ... not especially helpful. I'm looking for a quick check on whether I correctly pencil-whipped the form to reach my goal, which is to get my total withholdings reasonably close to my anticipated federal tax liability. Did I get this right?
The chorus is singing here: IRS 2020 W4 withholding: new calculation method, new form

The OP is asking about a specific situation that has many responses, so merging the thread into the mainstream would be confusing. Let's keep this discussion separate. (BTW, nice thread title.)
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neurosphere
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Re: Did I Pencil Whip My W-4 Correctly?

Post by neurosphere » Thu Jan 16, 2020 10:14 am

Someone posted this calculator from the IRS in another thread:
https://www.irs.gov/businesses/small-bu ... -employers

You can use it to figure out exactly what your employer will withhold based on your inputs on the new (or old!) W4. Massage the numbers to get whatever result you want. :)

This calculator is about +/- $4 per bi-monthly pay period when compared to other withholding calculation methods (there are many acceptable methods an employer can use).
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Workable Goblin
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Re: Did I Pencil Whip My W-4 Correctly?

Post by Workable Goblin » Thu Jan 16, 2020 10:59 am

willthrill81 wrote:
Tue Jan 14, 2020 12:09 pm
Funny enough, I've never heard anyone describe anything the IRS has ever produced as being especially helpful.
Probably because they just did their taxes and went on their way without worrying about it one way or the other...the old "only complainers make themselves known" problem.

For what it's worth, I found the 1040 ES quite helpful when I had to start paying estimated taxes a few years back.

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