New Withholding Tables

[Janey]

Has anyone looked at the new withholding tables? It looks like if someone is claiming married then the tables are adjusting for the whole $800 so if both husband and wife are working then their withholding will be adjusted for $1600. I have clients that will owe if this is true. Anyone agree or am I just looking at it wrong.

[JG EA]

Where did you find them?

[Janey]

Originally I was looking at the updates on my payroll software. I did finally find them on the IRS website. The tables at IRS look like they are only doing $400 for each . I have contacted the software company they look like they are doing the $800. It will probably work out these changes have been happening so fast.

[JG EA]

Found it also:

http://www.irs.gov/pub/irs-pdf/n1036.pdf

[joanmcq]

Anyone claiming 'married' where they both work is likely to be underwithheld anyways; the tables assume only one income for 'married'. CCH (I think it was a CCH bulletin at least) was warning that clients with multiple jobs are likely to be underwithheld too. A mess, especially if each one of your jobs has you under the income limit for the credit but together you are over.

[JG EA]

Did our first withholding today. One had a difference of $18 for semi monthly. 10 months x 2 x $18 = $360. So that one looks fine. We are keeping track of our payroll to get a hint of what it'll be like for clients to know if we should send out warning letters later on.

[JG EA]

Update on withholding. Now today we had a married person, semi-monthy with a difference of $32. So 10 months x 2 x $32 = $640. I can see a problem here already if the spouse works. We are keeping track so I can send out a warning letter later in the year to my tax clients to warn them they may owe or their refunds may be lowered if there are two jobs in the family.

My thought is to tell them to fill a new W-4 with the same withholding allowances but with the $ amount written in for the extra they have been getting.

[BHoffman]

I'm understanding that the payroll tax tables changed, but not the tax rates. Is that how you're seeing it?

So, clients are going to have less withheld and owe more at year end???

[S T]

Intuit

Since I use Quickbooks for payroll processing, Intuit has advised that they will have a new update on this sometime in Mid March, and it is suppose to provide us with some guidelines and corrected table info.

Then I also have a subscription to CFS W-4 Calculator, so I should also be receiving an update on that program.

I am hoping that by the end of March or actually after 4/15/09 to have the information available and that the software providers, etc can demonstrate how this is actually all going to work. Seems like it might be a lot of work, that we might not be able to charge for, except to reflect in the tax prep charges at some point.

My marginal refund clients, or clients that owe, as of now, we are filing in new W-4 forms to make sure they won't be in jeopardy of owing on the 2009 tax return.

Seems to me this about the same as it has been in years past, when the Government releases new withholding tables, and everyone has to "scramble" to adjust. I would be pleasantly surprised if it were something other than that!

Sandy

Sandy

[JG EA]

I'm understanding that the payroll tax tables changed, but not the tax rates. Is that how you're seeing it?

So, clients are going to have less withheld and owe more at year end???

Yes, they get a credit of $400 each in 2009. So, if up to $400 less was withheld they'd be fine. If more than $400 each was given back during the year - then they will owe or get less of a refund.

[Snaggletooth]

Hit the nail on the head

Anyone claiming 'married' where they both work is likely to be underwithheld anyways; the tables assume only one income for 'married'. CCH (I think it was a CCH bulletin at least) was warning that clients with multiple jobs are likely to be underwithheld too. A mess, especially if each one of your jobs has you under the income limit for the credit but together you are over.

Joan, I think your analysis is on target. Withholding tables have ALWAYS assumed only one income even if married, and have NEVER based the withholding on a two-income family. Works fine if mom (or dad) stays at home with kids, and a standard deduction begets a modest refund.

This has ALWAYS been the case...nothing new here.

And I have had problems with two-income families and tell them their best recourse is to have another $20 per week withheld if they want to avoid owing $1000. I tell them by adding a fixed amount to their withholding, the government can't screw around with percentages and formulas, but they will have an additional $1000 that no one can mess with.

My best explanation to them is that if you have 5 quarts of the husbands whiskey the government wants 80 proof, likewise if the wife has 5 quarts it must also be 80 proof. But if you pour them together and the govt now knows you have 10 quarts, they will then insist on 100 proof, but your 10 quarts are only 80 proof.