My daughter is filling out the forms for a new job and of course one is a W4. She’ll only have about 6 months of income in 2018 taxes (5 months plus her spring student job which is about equal to a month at new job), so will still be in a lower tax bracket but I know the forms will treat it as if she’d been earning this much for the entire year so will take more than she’ll probably need.
There is a worksheet, but it looks amazingly like the old ones (take an exemption if you are single, and extra if married, extra if head of household, etc). Since there is no longer a personal exemption or mortgage deduction, does she just take ONE like singles almost always did?
I’m really in denial over the new taxes and ‘hoping it all just works out,’ but I don’t want her to have to pay a bunch her first year.
https://www.irs.gov/pub/irs-pdf/fw4.pdf indicates that each additional allowance (line 5 of the form) corresponds to the assumption of $4,150 less income (see line 8 of the worksheet on the second page (not the form itself)). So claiming one more allowance will result in withholding $4,150 * tax_bracket less taxes over the year (5/12 of that if for income earned over five months). This will also result in that much more to pay, or that much less overpaid and refunded, after filing 2018 taxes in 2019.
Depending on the state, there may be a similar form for state income taxes. Some states use different withholding formulae from the federal income tax, so copying the numbers from the federal form W-4 (apparently the default in payroll services if no state form is given) can result in incorrect withholding for those states.
https://www.irs.gov/pub/irs-pdf/p15.pdf shows how much will be withheld for a given filing status and allowances reported on form W-4.
Luckily, it’s Florida so no state tax.
I don’t like to over-withhold, but with the new taxes, no exemption, mostly standard deduction, I just don’t know if people are finding it’s going to work out for them. I used to fiddle with the numbers, especially at this time of the year, to make sure I was going to hit the right number, and I was pretty good at it using the prior year’s tax tables and AGI. For her, her prior taxes don’t really give me a good picture since she was a dependent and took the standard deduction. She’s also going to contribute to a 401k to reduce income, and she might be eligible for a health savings account.
Guess we just guess.
Just estimate what she’ll earn, estimate her tax, and divide by the number a pay periods left. Should be pretty simple for someone young, and no deductions.