Anyone for some Friday math fun?

[kathyc2]

If my clients want help with more accurate withholding and estimates, I don't rely at all on the withholding tables. I figure out where their current withholding, whatever it is, puts them at the end of the year, and then I suggest adjustments ONLY to the "additional amount per pay period" number, I do not tell them to change anything else on the W-4, except maybe once at the first pay period of the new year (i.e. no changes mid year, only "additional amount per pay period"). Or, if they don't want to pay me for that analysis, then I just tell them their effective tax rate the prior year (usually between 10-25% for these clients), and then look at their most recent paystub, and see if the withholding so far is at least that much (percent) of their taxable gross.

There are times where this approach would work, other times when it would not. Say client is not having sufficient withholding based on status/number of exemptions, and you calculate x amount more needs to be withheld per paycheck. After you give them this amount, their income increases (raise or more overtime). When you calculated flat amount they were in the top end of 12% marginal rate, but the increased pay will all be at the 22% marginal rate. The flat amount will not be sufficient to cover the shortage from incorrect status/number of exemptions.

Here's another thing to consider with flat dollar amount: You do a mid year check-up and determine they will need 2K additional withheld to break even. Unless that amount is adjusted down the following year, they will have too much withheld in that year. Client may be okay with it as it will be a refund that year, but just something to keep in mind.

[Rapid Robert]

If my clients want help with more accurate withholding and estimates, I don't rely at all on the withholding tables. I figure out where their current withholding, whatever it is, puts them at the end of the year, and then I suggest adjustments ONLY to the "additional amount per pay period" number, I do not tell them to change anything else on the W-4, except maybe once at the first pay period of the new year (i.e. no changes mid year, only "additional amount per pay period"). Or, if they don't want to pay me for that analysis, then I just tell them their effective tax rate the prior year (usually between 10-25% for these clients), and then look at their most recent paystub, and see if the withholding so far is at least that much (percent) of their taxable gross.

The reason I mentioned suggestions to the IRS on the form is that you (kathyc2) said "the box is easy to overlook". So maybe they need to more emphatically highlight the box on the form, which they could do with different font, more white space, more of a warning, etc.

[kathyc2]

I hope the purpose of starting this thread was to encourage people who have suggestions on the new forms to provide them to the IRS, since the whole point is that they are asking for feedback. Remember, they already backed off on the new form 2019, so it's not like they're trying to ram something down the taxpayer's throat.

I personally don't know what else they can do other than what they are doing -- providing multiple tools, so that those taxpayers who care can use the best tool available, and those who don't care can just go past this step as painlessly as possible. It's not like the existing W-4 does such a great job, but it was something people were used to for many years. With the new temporary tax law changes, I for one agree that something different was needed. It's just a shame that the people who benefited the least from the new tax law are the ones who probably have to do the most extra work just to stay even.

Actually, the purpose of post was to encourage tax pros to understand how the new form and tables will affect withholding differently.

[kathyc2]

When you go back to not using computers to do tax returns then your comment will hold true. No one is “....dumbing down of society where people don't think....” rather using tools available to them. That is a silly comment you gave. Give society more credit. There are many happy and smart people with different views.

There is a big difference between using computers as an aid and using them to replace critical thinking and analysis. The calculator you linked has absolutely nothing to do with the revised W4 and for current year calculation has a major shortcoming in giving too much weight to one input variable. Those of us that understand how it comes up with the final recommendation will easily see this shortcoming.

[Rapid Robert]

I hope the purpose of starting this thread was to encourage people who have suggestions on the new forms to provide them to the IRS, since the whole point is that they are asking for feedback. Remember, they already backed off on the new form 2019, so it's not like they're trying to ram something down the taxpayer's throat.

I personally don't know what else they can do other than what they are doing -- providing multiple tools, so that those taxpayers who care can use the best tool available, and those who don't care can just go past this step as painlessly as possible. It's not like the existing W-4 does such a great job, but it was something people were used to for many years. With the new temporary tax law changes, I for one agree that something different was needed. It's just a shame that the people who benefited the least from the new tax law are the ones who probably have to do the most extra work just to stay even.

[TAXNJ]

Oh, yes, let's just dumbing down of society where people don't think but rely on computers to tell them what to do whether they understand the calculations behind the scene or not.

When you go back to not using computers to do tax returns then your comment will hold true. No one is “....dumbing down of society where people don't think....” rather using tools available to them. That is a silly comment you gave. Give society more credit. There are many happy and smart people with different views.

[kathyc2]

Consider using:

https://apps.irs.gov/app/withholding...ator/index.jsp

Oh, yes, let's just perpetuate the dumbing down of society where people don't think but rely on computers to tell them what to do whether they understand the calculations behind the scene or not.

[TAXNJ]

Teacher, teacher, I should get 90% for participation. 26 others have looked at the quiz and decide NOT to participate,

Consider using:

https://apps.irs.gov/app/withholdingcalculator/index.jsp

[kathyc2]

Here's another bonus question. TP currently claims S0. How would they complete new W4 to generate the same withholding?

[kathyc2]

[QUOTE=Rapid Robert;n However, it would be pretty dumb to not check the box for 2 jobs if you have two jobs in the household.


[/QUOTE]

That check box will be very easy to miss checking. How many people will realize the huge implications of checking it?

[Rapid Robert]

MFJ with box is $90 (total $9.360)
MFJ w/out box is $56 (total $5,824)
Single is $88 (total $4,576)

So both the MFJ w/box and single will come out close to even, the MFJ w/out the box will be severely under withheld. However, it would be pretty dumb to not check the box for 2 jobs if you have two jobs in the household.

I didn't find the instructions too complicated (assuming my answers match yours and we both think we are right). Remember too, the IRS instruction and withholding has to work for someone who does NOT file a new W-4, so it's pretty challenging to accommodate both old and new forms in the same calculation.

I didn't do your 3rd bonus question.

[kathyc2]

Ha, ha! The other 26 are probably waiting for their software to tell them.

[jmcdtax]

Teacher, teacher, I should get 90% for participation. 26 others have looked at the quiz and decide NOT to participate,

[kathyc2]

I see how you got your answers, 2 of them are incorrect, 1 answer is very close, may be due to rounding if you used the calculation method.

Second part of quiz was asking what would be their total tax when filing 1040. Hint: for MFJ 104,000 AGI tax would be 9,229 and single at 52K AGI tax would be 4,615. Question was will their withholding be enough to cover liability and if so, how much will refund be?

Third part was to calculate current withholding based on 2019 Pub 15.

[jmcdtax]

I am a sucker for quizzes.

Married with the box checked: $88 per week
Married without the box checked: $85 per week
Single: $125 per week

After that the instructions had me going in circles and nothing made sense.