How to share withholding burden between husband who make 350K and wife who makes 100K. When husband withholds as though he is only wage earner in family .

[denisb55]

I have family where  husband earns   $350,000 and wife earns  $100,000.  Problem is when wife does withholding she has to pay taxes at the marginal from 350K  up . so wife is paying a make larger percentage of wages as taxes.  Husband withholds as though he is the only earner in family.   Is there a way to share the burden better between  the husband and wife.

[George4Tacks · Accepted solution]

You can use Screen 7 to help to develop w-4 forms that make the clients happy. Here is the underlined link at the top of the Withholding Allowance ... section

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How do I enter deductions and credits on W-4/W-4P page 2? Withholding Allowance Certificate (W-4)

Page 2 of Form W-4/W-4P contains the "Deductions and Adjustments Worksheet", where allowances are adjusted for itemized deductions or credits the taxpayer may be claiming. Lines 1 thru 3 of the worksheet increases allowances by the amount itemized deductions exceeds the standard deduction. Line 4 includes an estimate of the adjustments to income. (Such as IRA deduction, 1/2 SE tax, etc).

Line 5 is where estimated credits are included. Since credits are a direct reduction to tax, as opposed to deductions, which reduce taxable income, credits must be converted to an equivalent amount of deductions to be included in the W-4 calculation. This is done on IRS publication 919, worksheet 8. The program generates worksheet 8, and includes the results on line 5 of page 2.

The total of itemized deductions in excess of standard deduction and credits converted to deductions is then reduced by income not subject to withholding. This result is divided by the personal exemption amount to derive additional allowances, if any, to claim on form W-4.

In computing W-4 page 2, the starting point for each of the above mentioned amounts is the amount on the current year return. These amounts can be adjusted by making entries in screen 7.1 "2019 Estimates (1040 ES)". For example, assume the taxpayer did not make any charitable contributions in the current year, but plans to contribute $2,000 in cash to Goodwill next year. This can be included on the W-4 worksheets by going into screen 7.1, and entering "2,000" in "50% Limitation [A] – gifts to charity" (Screen 7.1 "2019 Estimates", code 70).

Adoption credits are assumed to be a one year event, so are not automatically included in the W4 worksheet. If credits need to be adjusted on the W-4, an adjusting entry can be made in "Credits [A]" (Screen 7.2 "Withholding Allowance Certificate", code 43)