If you are married and both spouses work, watch out for the stimulus money that the federal government is giving to you in your paycheck. I read this article on Money.com which explains how it works.
Couples who are eligible to receive the stimulus money and file married/jointly will be overpaid because the system is set up to assume the other spouse doesn't work. Singles are supposed to get $400, and couples are supposed to get $800. But the article says that it's actually set up so that each spouse in a married couple gets $600, which means we'll get $1200 when we are only supposed to get $800. If we don't do anything, we'll end up owing $400 back to the government next April.
So dumb. It was easier to just get a check than to fool around with payroll.
Looks like it is time to revisit the IRS Withholding Calculator.
Thursday, April 2, 2009
Married Couples: Watch Out for that Stimulus Money
Saturday, April 5, 2008
How Much in Taxes Should I Withhold from My Paycheck?
Being the person in my company's human resources department who does the employment paperwork with new hires, I've come to realize that most people have not the slightest idea of the number of withholding allowances they should (or want) to put on their W-4. I'm not a financial advisor or a CPA, so I can't help them. They struggle through the crazy little worksheet that is supposed to help them figure out the number of allowances they should choose. And then they look at me and say, "Does that sound right?" I have no idea. I can't help them.
What I do assure them is that they will pay the same amount of income taxes no matter what they fill out on their W-4. The question is: will they pay the taxes during each pay period or on April 15? Will they get a big refund, owe more in taxes, or break even? There are so many factors that go into income taxes that there is no simple answer, which is why I do not have one for them.
The good news is that you can change your withholding allowances by filling out a new W-4 at anytime. Of course, that doesn't help what happened during past pay periods, but it does affect the future.
Personally, I prefer to have my withholding to be as close to the amount I will owe in taxes as possible. I don't want to owe more in taxes come April, but I also know that getting a big refund isn't advantageous either. (If you want to know more about that, read Savvy Strategies for Tax Refunds from the USA Today.)
Right now, I'm in a good place with my taxes. But come August, I'll get married, and my tax situation may be changing. I'll also have to consider what is going on with Michael's income and taxes. But rather than take a wild guess or try to figure out what to do based on that rather confusing W-4 worksheet, I'm going to use a tool on the IRS website: IRS Withholding Calculator.
If you have recently had or are going to have a change in status (i.e. marriage, divorce, birth or adoption of a child, home purchase) or if you just don't like your current way of paying taxes, check out this calculator. If you figure out that you need to make a change, go to your HR department and ask to fill out a new W-4.
Have you gotten or will you be getting a big refund this year? Washington Post columnist Michelle Singletary will tell you how to Use Your Foolish Refund Wisely.
