OT Federal Income Tax Withholding Question

Getting everything ready to go to the tax man. My wife works for a small private home health care agency. Last year she made almost $11,000, and the federal tax with held was $12.45. They take out Medicare and SS and those amounts seem right. They also took out state taxes. My question is, how can they only take out $12 for the year. She has asked for a new form to fill out for Fed with holding but hasn"t heard a word from them yet. I"m not sure how large a business has to be to with hold taxes, but it seems to me they either are going to take taxes out or not, so why just the small amount? If they aren"t going to take any taxes out, it would be nice to know so she could set some $$ aside to pay them. Any thoughts? Chris

Suspect her paychecks were small enough to not meet the threshold for withholding. She can increase withholding by claiming fewer dependents (or maybe none.) Also can set up a withholding (fixed) amount over what is automatically withheld. She needs to talk to payroll office. Trick is to balance withholding to whatever your taxes are going to be. (HARD TO DO!)

Well at least you got to have the money for awhile.

I keep all mine till the end of the year as well. But it is a big blow to pay it all at once.

Gary

Chris,
I kinda agree with IA Gary that your wife didn't have much withheld (as I do with my wife in Illinois) seems a little light though.
My thoughts are to donate the least you can and then PAY UP on April 15 vs the government having YOUR money all year.

Can't think how John T. might say it but THESE ARE JUST MY OPINIONS and I CANNOT BE HELD ACCOUTABLE IN A COURT OF LAW!

Jim

Ray has it covered. Calculate how much she needs taken out each pay period. Then she can fill out a new W4 and enter the additional amount in the proper box on the W4. There is no company size to with hold federal income tax. If they have payroll, they are required to with hold the tax.

Hmmm.. Having just finished my taxes and working on the daughters.. here's my take...

On $11K, married, they're not going to take much because your tax on that at year end shouldn't be much. IF it were the only reported income between the two of you, the IRS would send you money (Earned Income Credit if you have kids, Making work pay credit, possibly more ....it's unreal).

Withholding is based on what the total tax for the year should be. Since everyone gets certain exemptions/deductions before calculating taxable income, withholding doesn't kick in until after the averaged amount of those are accounted (ie you don't have taxable income until it gets above a number (around $13,500 for married couples) between standard deductions and exemptions). So they don't normally withhold until you get above that $. ... and it's averaged by pay period

Looking at the IRS guide for employers at http://www.irs.gov/pub/irs-pdf/p15a.pdf shows that with holding starts at $264/wk or $1146/mo and $11K really doesn't hit those.

So if you're wanting them to take taxes out to help offset other income (farm, self-employment, etc.) she's going to need to adjust her W-4 to take more out (and I think she'll have to do it on the fixed amount section because at normal rates they're not going to hit the table for taking any out).

One other option is to check the box for married but withhold at the higher single rate. That kicks in withholding at $116/wk or $504/month.

Sorry this is long... hope it helps.
Randy

One method, which works better if things are "usually" the same but which in any case normally keeps your nose clean with the penalties for not withholding enough is to make sure that what is withheld (and any estimated tax quarterly payments, if you do those) adds up to more (but not too much more) than last year's taxes. Use the "additional amount" box on W4 to do that - trying to make anything work with the W4 worksheet is a hopeless waste of time. You don't want a big refund. You don't want a big tax bill. You want to adjust to get as close to no money changing hands in April as possible.

If you, your spouse, or both have jobs with withholding, but also have the quarterly payments, it's worth knowing that you can adjust what's withheld with no penalty - whereas the quarterly payments are supposed to be all the same and they have a penalty if not, best I recall. One year our withholding ended up way light for some reason, and I noticed it about September. We were able to jack it up through December and then put it where it should have been in January, and got enough paid in to avoid the underpayment penalties.