W4 --Additional amount withheld from my paycheck
I earn around 85k and my husband around 100k. Last year we paid around 5000$ in tax. Now my husband says to include 2500 as my additional withheld money from my each pay check.
What does this mean? What is this 00 withheld in my paycheck? Will this amount be deducted from my salary and paid towards the tax? if that's the case for 12 months the tax is get to be paid is 2500*12. I am very new to all this. Can anyone explain? Do I get a refund if I withheld 2500$ every paycheck?
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As @littleadv 's comment on your question said, it is unlikely that
you and your husband paid a total of K in income tax on 5K of
wages in 2013. More likely, your 2013 tax return (assumed to be a Married
Filing Jointly tax return) showed that you had not arranged to have
enough tax withheld from your salaries and thus you still owed K
to the IRS for 2013 taxes. Most likely, that K sum included not
just the unpaid amount of tax but also penalties for not paying
enough income tax during 2013 and interest on the amounts not paid
on time. Just to be clear, note that the income tax you paid for
2013 during 2013 is the total of all income tax withheld from your
wages by your employers (plus any estimated tax payments that
you might have made for 2013).
If your 2014 tax return (that you will be filing by April 15, 2015)
will likely show a similar amount due for 2014 taxes, you can avoid
the penalties and interest by increasing your income tax withholding
by a substantial amount for the remainder of 2014. If you are paid
monthly and have two paychecks still to be received, then having
00 extra withheld from each paycheck will cover the K shortfall
that you expect to have for 2014 taxes.
I assume that this is what your husband intended you to do, and to do
this, you need to fill out a new W-4 Form (asking that an addiitonal
00 be withheld from each paycheck) and give this form to your employer
soon (i.e. well before Payroll processes your next paycheck which usually
happens a few days before you get the paycheck). If you do so, your
take-home pay will be reduced by 00 on each of
the next two monthly paychecks because your employer will
withhold this extra amount from your pay and include it in the amount
sent to the IRS as income tax withheld from your paycheck.
After your last paycheck for 2014 has been received, you should
submit a new W-4 Form to your asking for only 7 in extra income tax to
be withheld from each paycheck starting January 1, 2015, so that
the expected K shortfall for 2015
is paid in 12 equal monthly installments. If you neglect to do
this, your
employer will continue to withhold 00 extra as income tax, and you will
get 00 less in take-home pay month after month in 2015. This money
will not disappear forever; come 2016 when you file your income tax
return for 2015, you will receive a substantial refund because you
overpaid income tax by a lot during 2015. You will not, however, receive any
interest on the amount that the IRS is returning to you unless the IRS
delays in sending you the refund for some reason. Alternatively, you can file
a new W-4 asking for no additional tax to be withheld from 2015 paychecks,
and a year from now, go through the same exercise as above: have 00
extra withheld from the last two paychecks for 2015, right when the holidays are
coming and people are shopping for gifts.
If your regular withholding is not enough to cover your tax due, then you can withhold extra taxes to avoid owing anything the following April 15. Alternatively, you may make estimated tax payments to avoid owing anything the following year. Some taxpayers will be required to make estimated payments, typically when the tax due will be sufficiently larger than the amount of withholding.
If your husband says that you owed ,000 in April, then he wants you both to withhold ,500 for the entire year. If all your income is shared, then that makes sense. But if your income is not entirely shared and your personal luxury expenses come from your income, then this sounds a little unfair (you are paying some of the tax on his income). If you don't share 100% of your income, then he should withhold more extra than you do (something more like ,700 for him and ,300 for you, depending on the details). If you share everything, then all the income and all the taxes are shared so the individual accounting matters little.
Yes, if you overpay taxes, you may get a refund. Do not do this, that's just an interest-free loan to the government. Instead, put the extra money into a savings account of your choice and withdraw it whenever you want.
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