Withholding Percentage

[Bonnie]

Does anyone know of a web site where I can plug in an amount and it will show the proper amount to be withheld for federal tax. Or somewhere I can get a chart with % that should be withheld? Taxpayer owes and claims he has 0 on his W-4. He has lots itemized deductions and should not owe if claiming zero. So I'd like to check to see what should be withheld.

[Matt Sova]

irs.gov

When I need to check this type of thing I go to irs.gov. Under Forms and Publications you will see Pub 15. Go to page 45 under Annual Payroll Period. Since there are "no exemptions" per your client you can take the Gross wage and calculate, roughly, what the total WH on the W-2 should be. If it is drastically different he should contact his HR dept and see exactly what he is claiming.

[ToledoEd]

Remember there is a difference between Married and no dependents and Single and no dependents.

[DaveinTexas]

Website

I use this one: https://www.yourmoneypage.com/withhold/fedwh1.php

It's a goofy looking site but reliable indeed.

Some questions to ask the client would be:
1. When did you change your withholding to 0?
2. Single 0 or Married 0?
3. Does your salary consist of a base rate of pay plus commissions/bonuses or just a straight salary?
4. Was the withholding on your base income Single 0 but you went "exempt" on your bonus/commission checks?

[taxea]

Does anyone know of a web site where I can plug in an amount and it will show the proper amount to be withheld for federal tax. Or somewhere I can get a chart with % that should be withheld? Taxpayer owes and claims he has 0 on his W-4. He has lots itemized deductions and should not owe if claiming zero. So I'd like to check to see what should be withheld.

As him for the final 12/15 paystub from his employer. It will tell you what he is claiming.

[abctax]

Not all...

"...It will tell you what he is claiming."

Not all employers put that info on the paystubs.

[Bonnie]

He did check to make sure what he has on W4 and it is married and 0. No commissions, just hourly employee. His wife does work and she has married and 1 on her W-4 (she checked too, after I prepared return). Itemized deductions almost 18,000, no dependents. but should not owe with the itemized deductions. Having two incomes does affect things, I realize, but still doesn't seem correct

[Burke]

Depending on the incomes (total) it could be why he owes, due to wife claiming Married + 1. I have couples who both claim Single, 0, and STILL have to have extra withholding taken out. The tables do not consider other income coming into household. Also, you did not mention divs/int/cap gains, or other misc income which also has to be covered by the wage withholding.
So the withholding on his income alone may be correct, but when you combine MFJ, it bumps up into a higher percentage. Take the total tax liability (Line 63) and divide by the taxable income (Line 43), to get the "real" tax rate percentage. Then check each W-2 against that percentage and you can tell who is coming up short.

[DaveinTexas]

Spot on

Great point Burke. The classic example is when the husband earns an amount of income such that the couple is already in the 25% tax bracket. This means every dollar earned above this amount is taxed at 25%. The wife also works and earns $20,000; costing the couple an additional $5,000 in tax. Well, even if the wife withholds at Single 0, her withholding will never be adequate to cover the tax her income causes.

Also, when both spouses claim Married, they are telling their employer they have at least $25,200 in deductions (Married Standard Deduction X 2). If their deductions are only 18,000, then one should claim Married and the other should claim Single. If they both claim Married (plus any exemptions) and they don't have any other credits (child tax credits) to offest their tax, they will almost always owe taxes.

[Bonnie]

Thank you, just had a light bulb moment. My tax program even gives me the effective tax rate. Just never thought to use that to determine how much they need to have withheld. They are in 15% bracket. Only income wages from two W-2s and about 400 state refund from prior year. Effective tax rate 12.91% and I had that all along in my program. Guess just been too busy lately to think clearly. Thanks for all the help

[taxea]

"...It will tell you what he is claiming."

Not all employers put that info on the paystubs.

All of my clients employers do.