Fed WH Tax

[QKbookkeepingservices]

I have a client that has one employee.  This employee claims single and two kids.   Last year grossed $54359 and only had just over $500 taken out for Fed WH tax.   He had to pay $2400 in taxes.

This year he has grossed $5840 so far and yet only $10.67 in Fed WH has been taken out!!   I have just spent an hour and half on phone with Intuit payroll and didn't get this resolved.  Unless the employee marks Exempt....there will be Fed WH taxes taken out until they reach their cap!     Is anyone else having this issue?  What is going on?

[abctax55]

1) You need to ask in the QB forum - this one is for income tax prep

2) Check what is set for withholdings based on the W-4.

3) Make sure PR tables are updated.

4) Check the payperiod being used (weekly, biweekly, semimonthly, annual, etc...).

[TaxGuyBill]

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@QKbookkeepingservices wrote:

 I have just spent an hour and half on phone with Intuit payroll and didn't get this resolved. 

Unless the employee marks Exempt....there will be Fed WH taxes taken out until they reach their cap!  

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Have you checked the withholding tables and calculations to see if the program is doing it wrong?  If not, why would you call Intuit for something that might be correct?  If the client is not having enough tax withheld, it is quite likely the W-4 is either not filled out correctly or was entered incorrectly.

I don't understand that last thing you said.  I thought you were complaining they weren't taking out enough tax, but then that last part seems to indicate you don't want ANY tax withheld.

[rbynaker]

I agree with abc, but since you did post this in an income tax forum . . .

I've studied the "new" (and improved?) W-4 in detail.  With $54K of income the W-4 "math" will deduct a standard deduction of $12,550 and assume the rest is taxable income.  So let's call that $42K of TI.  Tax on Single w/$42K of TI is roughly $5K BUT adding the 2 kids in Step 3 gets you $4K in CTC, leaving you with only $1K of fed w/h.  If there are fluctuating paychecks (i.e. hourly pay) I could see $1K getting whittled down to your "just over $500" w/h for the year.

So this might not be wrong even though it's not the desired outcome.

With 2 kids, does that put him into HOH filing status?  That may make a difference but I'll assume not since you didn't mention it.  Their ages will make a difference, and the amount of advance CTC plugs into the equation as well.  The "2021" problem is that your client already "collected" $2,000 per kid of the child tax credit via reduced withholding (thanks Step 3!) and then was likely also paid $1,500 - $1,800 per kid directly from the IRS (thanks ARPA!)  If the credit allowed is only $3,000 per kid (i.e. they're both 6+) but he already collected $3,500 each then he has to pay part of that back.  Welcome to unintended consequences.

Without knowing pay frequency and number of pay periods so far this year I can't really speak to the $10.67 on $5,840 but it's not necessarily out of the ballpark either, especially if we're talking about 4 pay periods YTD.

If he needs more withheld, either drop one or both kids from the W-4 or use Step 4 for either other income or extra withholding.

Rick

[QKbookkeepingservices]

Thank you Rick for the response!  Also for not being rude as some.  🙂

[abctax55]

@QKbookkeepingservices 

No one was rude to you.

[qbteachmt]

@QKbookkeepingservices 

I pointed out (in a topic you started yesterday) that you are Lost on the Internet, asking Payroll in an income tax preparer forum. I also provided the link to the QB Community, and here it is again:

QB Community

So, not only is no one being rude, but everyone is trying to help you, and getting to the right resource would be part of that help. You are asking the wrong community, because nothing supports QuickBooks users. That's why Intuit doesn't mix Mint and QB and EasyACCT and Lacerte = different functions and uses.

As for your issue, give the client a W4 Worksheet. They might have other personal issues that matter, because the W4 is trying to take into account Payroll. But withholding is to help against their entire tax liability, and they can either add Estimate Payments or increase their Withholding, but only they will know their entire financial picture.

No one on the internet can help with this.