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Started By
Message
Changing my withholdings, deferred comp
Posted on 6/17/11 at 10:19 am
Posted on 6/17/11 at 10:19 am
I get the max withheld out of my paycheck. I got my tax return back a few months ago and it was way to high. I like getting a little money back, but I don't want to get that much back. I can use that money elsewhere.
What I'd like to do is take some of that money that is being withheld and put it in a deferred comp option that I have. But I'd also like to keep my paycheck at what it currently is, or very close to it. The problem is that I'm completely ignorant as to how to do this and how all this works. Don't get me wrong, I know how taxes work and things like that. But I don't know what to change as far as what is withheld. I also don't know anything about deferred comp, outside of the general concept and the math behind it.
Any advice?
What I'd like to do is take some of that money that is being withheld and put it in a deferred comp option that I have. But I'd also like to keep my paycheck at what it currently is, or very close to it. The problem is that I'm completely ignorant as to how to do this and how all this works. Don't get me wrong, I know how taxes work and things like that. But I don't know what to change as far as what is withheld. I also don't know anything about deferred comp, outside of the general concept and the math behind it.
Any advice?
3
Posted on 6/17/11 at 2:52 pm to Ole Miss Sucks
First, determine how much you want to contribute annually to your deferred compensation for the year. (401k limits are 16,500/year, and Roth IRA is 5,000 but tax deductibility is based on your income level, so be careful)
Go the IRS site and find the "IRS Withholding Calculator."
Before you do that, you should have:
1. Your last paystub (you'll need withheld taxes, compensation to date, etc)
2. The total amount of any deductions you'll claim for the year, including taxes, mortgage interest, and any amounts you plan to contribute to a deferred compensation plan
3. It will walk you through entering your information and show you what your expected tax withdrawals will be for the year, based on your current withholding.
It will also show you how much your expected tax obligation for the year will be.
4. It will recommend (based on the info in step 3) changing your IRS witholding to a certain number to net out your taxes at year end.
Finally, go to Paycheckcity.com and find the paycheck calculator. It will ask you to enter your salary, withholding status (use the NEW number that the IRS provided), 401k, any other money withheld from your paycheck, and provide and estimate of your net pay based on your entry.
You should probably check your IRS withholding calculator a couple times a year to make sure you're on the right track. If you don't withhold enough, you may have to pay a penalty when you file your income tax.
Good luck!
Go the IRS site and find the "IRS Withholding Calculator."
Before you do that, you should have:
1. Your last paystub (you'll need withheld taxes, compensation to date, etc)
2. The total amount of any deductions you'll claim for the year, including taxes, mortgage interest, and any amounts you plan to contribute to a deferred compensation plan
3. It will walk you through entering your information and show you what your expected tax withdrawals will be for the year, based on your current withholding.
It will also show you how much your expected tax obligation for the year will be.
4. It will recommend (based on the info in step 3) changing your IRS witholding to a certain number to net out your taxes at year end.
Finally, go to Paycheckcity.com and find the paycheck calculator. It will ask you to enter your salary, withholding status (use the NEW number that the IRS provided), 401k, any other money withheld from your paycheck, and provide and estimate of your net pay based on your entry.
You should probably check your IRS withholding calculator a couple times a year to make sure you're on the right track. If you don't withhold enough, you may have to pay a penalty when you file your income tax.
Good luck!
Posted on 6/18/11 at 7:39 am to Ole Miss Sucks
So you know how much of a refund you would like to get. You can then determine the amount to withhold by adding the refund and your income tax liability, adjusted for any tax creidts you may be eligible for. As such you will need a method of projecting your income tax liability so you can determine the total amount of tax you would like withheld.
There is all sorts of tax projection software available from the very detailed to the very basic. The right software depends on how accurate you want to be, but for your purposes you probably do not need to be very precise since you want some margin for error to avoid under withholding.
Once you have determined how much withholding you need for the year then you need to determine how to adjust your withholding in order to hit your target. Again there are programs available on the net that can do this for you. They will tell you how you need to adjust your W-4 for the remainder of the year.
Be advised though that if you lower your withholding to take into account a higher withholding rate for a portion of 2011, then you will bneed to adjust your withholding rate for 2012 to get the right rate for the entire year.
There is all sorts of tax projection software available from the very detailed to the very basic. The right software depends on how accurate you want to be, but for your purposes you probably do not need to be very precise since you want some margin for error to avoid under withholding.
Once you have determined how much withholding you need for the year then you need to determine how to adjust your withholding in order to hit your target. Again there are programs available on the net that can do this for you. They will tell you how you need to adjust your W-4 for the remainder of the year.
Be advised though that if you lower your withholding to take into account a higher withholding rate for a portion of 2011, then you will bneed to adjust your withholding rate for 2012 to get the right rate for the entire year.
Posted on 6/18/11 at 5:54 pm to Ole Miss Sucks
Thanks for the help.
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