Form W4

[rcooley25]

I have prepared several income tax returns over the last few days that have had unpleasant answers due to how the w4 was filled out when they joined a new company. Are the new w4s that complicated or are the people just plain stupid or is it both?

[jeffmcpa2010]

I choose answer #2

How hard is it to look at your pay stub and compare the withholding to one from the prior company?

[garman22]

I dont blame people. 

IRS/Company: its your responsibility to make sure you are having the proper withholding. 

Me: Do I look like a f*cking tax person, am I in payroll??? Im a friggin electrician!!

Now, if they withhold a ridiculously low amount, thats on the person. 

[rcooley25]

That is what I am trying to say.

It is all of their faults.

When the taxpayer notices a small amount being withheld they dont have to be a rocket scientist  to realize that something is wrong.

I had this one client that had a wife who decided to go back to work this year. She earned $38000.00 dollars and when I looked at her w2 it said that only $68.00 withheld for federal income taxes. Put that income on to her husbands $140000.00 salary and boy did she ever have a pissed off husband.

By the way, you left the letter U off of your response.

[rcooley25]

It is very .hard to do when you have the IQ of an Nin com poop

[qbteachmt]

See:

https://www.reddit.com/r/taxpros/comments/1216b8q/anyone_else_seeing_an_increase_in_underwithheld/

and last year, too:

https://www.reddit.com/r/taxpros/comments/u1japy/so_many_people_underwithheld_this_year/

Some employers are not even transitioned for their previous hires and are taking the heat for underwithholding. I send a notice at year end and also at this time of year to remind everyone about W4 updates, retirement and benefit plans, health plan options and other life changes that affect on-the-job provisions. When they are doing their taxes, people finally pay attention to some of these topics.

[dkh]

I blame the new W4s.    Employees that have not had to complete a new W4 for 5+ years are baffled by the current four page W4.   Many of them want to know where to put the number of children they want to claim.   Claiming dependents on Step 3 of W4  does not produce the tax withholding outcome many actually want .      

[taxes96786]

Companies don't offer any advice on filling out a W4 because they may not know the employee's circumstances.

Here is how I advise my clients:

If you are single you always claim S-0.

If you are married, the spouse with the higher salary claims M-0 when there are no dependents and M-X

for the number of dependents. The spouse with the lower salary always claims married at S-0 rate.

If there is a house involved then further calculation is done to determine further deductions to claim.

Follow this rule and the taxpayer will not owe at the end of the year.

[abctax55]

"If you are single you always claim S-0."

I have many single clients who make decent money and own homes with mortgages, & property taxes, and are charitably inclined.  If they claim "single & zero" they would be substantially over-withheld and would have effectively made an interest-free loan to the government.  That's poor money management, and a disservice to the client.  

Blanket positions/statements are always (well, often? sometimes? generally?) not a good idea nor are they helpful.   Every situation may be different.

@rcooley25  TaxTools by CFS has a W-4 calculator that is very good.  You can download the software as a demo to play with & see if you like it.

[IRonMaN]

The W-4s are too confusing.  And once they start withholding most folks don't have a clue as to what the correct withholding really should be.  But with that said, if both spouses are working and both are making 100 grand a year, they might want to question if the $1.20 they each had in federal withholding for the year is gong to be a little light.

[rcooley25]

I could not agree with you more for people under the circumstances you are mentioning. But many many people are not under those same circumstances.

[rbynaker]

The new forms are typically more than non-financial folks can understand.  I'm with garman on that one, I don't expect my plumber to understand how income taxes work.  Folks who learned under the "old" system that they could save money for vacation by claiming S-0 now have no way to enter withholding allowances.  If you follow the directions in the new (and "improved"?) W-4 you should end up with $0 balance due/refund at the end of the year.  But nobody reads the directions, and most people don't want to end up at $0 when they've come to rely on big refunds to pay for stuff.  If it's not in a 15-second Tiktok video, they can't be bothered with it.  So you end up with Taxpayer filling out the W-4 as married with 2 CTCs, then Spouse gets a new job and fills out a W-4 as married with 2 CTCs, and suddenly they owe thousands of dollars at the end of the year.

Another thing I run into that I'm trying to get ahead of is when CTCs age-out folks really should fill out a new W-4.  But CTC was a moving target last year with the CTC advances and phase-outs.  An extension for that insanity was in BBB that didn't pass and it still gets plugged into other legislation.  So who knows when/if that change will come and then whether or not the IRS will adjust the W-4 math to compensate for folks "double dipping" on getting CTC as an advance AND as part of their paycheck.

So yes, it's a mess out there, but I don't blame taxpayers for it.

[qbteachmt]

The tax tables are meaningless to many people. I advise them to select Single, for the first submission and we will finetune it later. For two-job families, or one job and one self-employed, I advise Single and then an additional amount we determine. For W4P we figure it out by safe harbor. For W4V I advise 22% on their largest source(s), if they have multiple sources and can't put withholding on all of them (or some are so small, they don't want to lose even a bit). It's like being a short order cook.

[taxes96786]

abctax

you didn't read my full post or you missed the part that addressed home ownership calculation

[rcooley25]

At first yes I agree with you. Blame the W4. But once they styart receiving payroll checks with little or no income taxs being withheld then they must know something is wrong and should get it corrected.

[IRonMaN]

@rcooley25  - you have a tendency to talk to certain people in a post, but even though you know who you are talking to, we have no idea who you are talking to or agreeing with.  Even though you can "reply" to a specific post, Intuit doesn't leave bird tracks as to who that person is.  It would be helpful if you used someone's name in your response as to who you are speaking to.  

[Greta]

Clients have asked my help with W-4, but I too am befuddled by it. Especially clients who retire and have multiple sources of 1099-Rs, Social Security, investment income. I often fill out a V-4 withholding request for the social security benefits. If one year is way off, we fix it the following year.