W-4 Time

Save your paystubs and update your withholding

Today TaxMama® hears from Bingo1 in the TaxQuips Forum, with this disturbing question. “On the w4 form I believe the amount for line 5 is 2 because my husband is the only one working and I don’t work. I have two kids. Is that correct? My CPA told me I should use 1 on line 5. But I believe that is wrong. Please let me know.”

                            

Dear Bingo and Friends,

There are three issues I want to cover today:

1) This IS the time to file new W-4s with your employers to instruct them on what to withhold from your paychecks for 2015.

2) If you are already working with a CPA or Enrolled Agent who has given you guidance on what to enter the Form W-4, why would you doubt them? If you really believe they don’t know what they are talking about – don’t work with them. But if they are competent, why second-guess them?

3) The IRS instructions for the Form W-4 are so confusing that it took a tax pro 25 pages to explain them. Don’t waste your time trying to follow them. The size of your family is meaningless. What matters is the joint income and the allowable deductions or standard deductions, your tax credits and the net tax liability that results. This means, to get the withholding right, you must do a projection of your expected tax liability for the year. Then you can follow a really old TaxMama® strategy with only 5 simple steps (from a 2005 TaxQuip).

And remember, you can find answers to all kinds of questions about withholding and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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