Today TaxMama hears from Ross in NJ who wants to know. “My wife is self-employed and I am employed at an office. We were told that I could adjust my W-4 to cover her estimated taxes, thereby eliminating the need to make quarterly payments. Is this correct? If so, how do we do that?”
Yes, you may.
It’s actually pretty easy to do – if you do this kind of thing all day long.
But, when I try to write out the steps for you, it actually starts to look more complicated than it is.
The easiest way to do this is to have your tax professional figure out the additional taxes that will be due to IRS, NJ and Social Security and Medicare.
Of course, if you want to do it yourself, start by doing a quickie projection of what you think your wife’s profits will be by the end of the year.
Once you know that, multiply the profits by 15.3% to compute the self-employment taxes (her contribution to SS & Medicare for the year).
Next step is to multiply her profits by your projected tax bracket, when you add her profits to your wages. http://www.irs.gov/formspubs/article/0,,id=133517,00.html
Add the self-employment taxes to the total IRS income taxes, then read this article about how to fill out your W-4. http://www.taxmama.com/Articles/w-4prsnl.html
Of course, you’ll need to do the same thing for your state – except you can leave out the self-employment taxes. States don’t collect those.
Now do you see why I suggest that you have your tax professional do this? Since you have to figure out her profits, take into account the SE taxes and state taxes, then divide all the taxes by the number of pay periods you have left when you submit all this…let your tax pro run with this. You’ll get a more accurate number.
And remember, you’ll find answers to questions about estimated taxes and all kinds of tax issues, free. Where? Where else? At TaxMama.com
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