Exemption/Withholding Calculator

[annethcz]

I've been playing with tax forms today using our last paychecks for 2010 and it appears that our withholding was COMPLETELY wrong.  We use the government worksheets, but still somehow ended up owing over $1800 to the feds and even more than that to the state.  I'm baffled because the W4 worksheets have always worked for us in the past (have actually resulted in some pretty hefty refunds over the years), and I feel that I have a pretty good basic understanding of the US individual tax code. 

I know I've seen people post links to better calculators, but I haven't had much luck with the google.  Can anyone point me in the right direction?  I want to get the withholding on our paychecks fixed now, so we don't have this problem in 2011.

[heatherdeg]

I've never had luck with the calculators because they never account for all the stupid nonsense that really affects our withholding.  We've had way better luck asking our accountant in Feb. (when we do our taxes) and then again in late July (so we can make it up in small pieces through the end of Dec.).

Of course, if you do your taxes yourself, that's no help.  :/

[mnnice]

We do our taxes ourselves and DH does an estimate usually in Oct to make sure we are not over or underwithheld too drastically.  This year we were pretty badly underwithheld and DH attempted to correct it by having his paycheck very withheld (his checks were about 1/5 of what they had been.) for 2 1/2 to 3 months. 

I actually think that $1800 underwithheld it pretty good.  Not a huge amount to cough up, most likely you'll have no penalties, and you haven't given the governement and interest free loan.  

[Vaske]

If you've only been using the W4 worksheets, then the IRS's online withholding calculator should give you at least a better idea (though it looks like they don't have the 2011 version ready yet).  There is a link to it from their Individuals page.

[LifewithSage]

I use the IRS withholding calculator linked above.  I usually have great luck with it, but this year it was extremely off.  I'm not sure if it was because of the late change to the tax code or what, but we have overpaid by quite a bit this year.  I never like to do that because that's money that I could have used last year... ugh. 

Anyways, what I have found to be better than adjusting the number of withholdings is to implement a fixed deduction for my paycheck.  I figure out what amount of tax we estimate we need to pay in and then I just tell our payroll lady and she fixes my tax payments to that amount.  Is has helped immensely.

[nd_deadhead]

I don't think the calculators work very well if you have two incomes. The second income could put you in a higher tax bracket, and the calculator does not adjust for that (that's my guess, anyway, without actually running numbers through).

[LifewithSage]

The withholding calculator on www.irs.gov takes in account the 2 salaries (or even more, if someone has more than one job or has worked at more than one place during the year).  That's why it's better to use their calculator online than the withholding worksheet.  The withholding worksheet only takes in account one person's income.