Exact amount of Tax Withholding

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Topic Author
armeliusc
Posts: 537
Joined: Wed Dec 21, 2011 8:40 am

Exact amount of Tax Withholding

Post by armeliusc »

I am trying to figure out what's the best way to get the exact amount of tax withheld from my paycheck. I can pretty much figure out already what my tax burden will be for 2024 (W2 jobs, no mid-year increase, no bonuses). However, because of 401K and after tax contribution, my withholding will change at least 3 times during the year: (1) When all of my deduction is contributed to 401K (2). When part of it is contributed to 401K and after-tax (3). When the whole thing is contributed to after tax.

This makes it hard try to catch up and adjust the withholding, especially since (2) and (3) would happen at the late part of the year (usually around October), making it too late to adjust enough for the year to get minimum owe / refund. Plus I usually need at least the January paycheck to figure out my current withholding (e.g. after pay increase) and adjust.

I wish there was an easy way to just set the exact withholding for the whole year. I am thinking in W4, I could just crank up the value in (3) to something really high (forcing the calculation to zero withholding), then put the exact amount in 4(c). But is that "illegal" or allowed? The instructions on what to put for (3) makes me wary to do this. Genuinely, I am not trying to be dishonest, but it is like I'm "gaming" the tax withholding calculation.

Any thoughts? or do I just have to content with making multiple adjustments to W4 (and in all likelihood, will still miss few tens if not hundreds dollars).
Silk McCue
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Re: Exact amount of Tax Withholding

Post by Silk McCue »

Now retired but in the past would make it such that I entered a per pay period $ amount to meet the annual obligation. I would make changes later in the year if needed. IRS isn’t going to care so long as you are not structuring the amount to grossly underpay most of the year and then make it up in December.

Cheers
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tetractys
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Re: Exact amount of Tax Withholding

Post by tetractys »

Can you use lines 4(b) and 4(c)? Subtract withholding for all your deductions and then add in the amount you want withheld.
Spring garden
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Re: Exact amount of Tax Withholding

Post by Spring garden »

Add up your planned pretax and after tax total contributions for the year, then divide each by # of pay periods and contribute the same amount throughout the year. For example, $865 pretax and $1,000 posttax for each paycheck or whatever the numbers work out to be for you. Then compare what you are withholding to what you need to and dial it in via the w4 for whatever withholding amount you want to target.
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FiveK
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Re: Exact amount of Tax Withholding

Post by FiveK »

armeliusc wrote: Mon Feb 05, 2024 7:17 pm I am trying to figure out what's the best way to get the exact amount of tax withheld from my paycheck. I can pretty much figure out already what my tax burden will be for 2024 (W2 jobs, no mid-year increase, no bonuses). However, because of 401K and after tax contribution, my withholding will change at least 3 times during the year: (1) When all of my deduction is contributed to 401K (2). When part of it is contributed to 401K and after-tax (3). When the whole thing is contributed to after tax.
Publication 15-T describes how the withholding calculation works.

If you can match year-to-date withholding, and can then predict what your taxable income will be on future paychecks, you could figure out what W-4 entries would get you the desired amount at the end of the year.
rkhusky
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Re: Exact amount of Tax Withholding

Post by rkhusky »

At my job I just told HR how much I wanted taken out per paycheck and they made it happen. If you have to submit a W4, you can do the same thing. Just don’t abuse the system or the IRS can force your employer to withhold a specific amount. See lock-in letter in Q1:
https://www.irs.gov/businesses/small-bu ... nd-answers
Topic Author
armeliusc
Posts: 537
Joined: Wed Dec 21, 2011 8:40 am

Re: Exact amount of Tax Withholding

Post by armeliusc »

Spring garden wrote: Mon Feb 05, 2024 8:12 pm Add up your planned pretax and after tax total contributions for the year, then divide each by # of pay periods and contribute the same amount throughout the year. For example, $865 pretax and $1,000 posttax for each paycheck or whatever the numbers work out to be for you. Then compare what you are withholding to what you need to and dial it in via the w4 for whatever withholding amount you want to target.
I wish I could do that. The problem is my employer only allow percentage contribution, not absolute amount. So I'll have to set "25% of paycheck" or whatever. They'll put everything in 401K up to the year limit, then the rest to after tax. Hence the 3 different phase of withholding I have.
Topic Author
armeliusc
Posts: 537
Joined: Wed Dec 21, 2011 8:40 am

Re: Exact amount of Tax Withholding

Post by armeliusc »

FiveK wrote: Tue Feb 06, 2024 12:37 am
armeliusc wrote: Mon Feb 05, 2024 7:17 pm I am trying to figure out what's the best way to get the exact amount of tax withheld from my paycheck. I can pretty much figure out already what my tax burden will be for 2024 (W2 jobs, no mid-year increase, no bonuses). However, because of 401K and after tax contribution, my withholding will change at least 3 times during the year: (1) When all of my deduction is contributed to 401K (2). When part of it is contributed to 401K and after-tax (3). When the whole thing is contributed to after tax.
Publication 15-T describes how the withholding calculation works.

If you can match year-to-date withholding, and can then predict what your taxable income will be on future paychecks, you could figure out what W-4 entries would get you the desired amount at the end of the year.
Yeah .. I started looking at the publication. I do my own taxes by hand and all that, but it's just to get too much to try to figure out the withholding calculation from that pub :?
Spring garden
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Re: Exact amount of Tax Withholding

Post by Spring garden »

armeliusc wrote: Tue Feb 06, 2024 8:21 am
I wish I could do that. The problem is my employer only allow percentage contribution, not absolute amount. So I'll have to set "25% of paycheck" or whatever. They'll put everything in 401K up to the year limit, then the rest to after tax. Hence the 3 different phase of withholding I have.
Can you set as percent separate for pretax and posttax and back calculate the percentage needed for pretax? If not through the online interface, perhaps your HR rep can set it up this way.
Many employers will cap the posttax percentage contribution at some percent anyway for HCE so by only contributing posttax for part of the year you might be missing out on some posttax contributions.

So say you want to put in 23,000 pretax and have 26 paychecks. 23,000/26 = $884.6 target per pay paycheck. 884.6/gross pay per paycheck = percent to put toward pretax. Use a similar exercise for posttax or whatever the cap is if your employer limits posttax contributions for hce or just limits in general.

Now you would need to subtract whatever is already done for this year before dividing and can change at the end of the year so that it is stable for next year. Then each year in late December adjust percentage depending on IRS limits and pay increases.
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