Fill Out W4 To Maximize Monthly Income Without Paying IRS At End Of Year

This is part two of filling out your W4, we have been talking about withholding the right amount of money so at the end of the year, you don’t owe or you don’t have to pay. In other words, you’ll get your money during the year rather than using the IRS as a bank and getting a large refund at the end. If you’re a good money manager, you know it’s best, better to have your money now because of the time value of money. We learned in part one that claiming zero is not enough. If a second income puts you at a higher tax bracket, you will not be withholding enough on your W2.

So, we see… Here, we’re going to learn whatever additional withholdings or deduction would I need in order to make sure at the end of the year we come even. Let us talk about additional deductions you might be eligible to claim. Now, this portion of it, I don’t really recommend that you complete it and take the additional exemptions. Just because, like I said, I like that leeway, but however it’s pretty significant, please then go ahead.

For example, if you plan to itemize deductions… Well, because of the new tax law, a lot of people are not going to qualify to itemize. So, it’s not going to really apply to you. If you have a home mortgage interest, charitable deductions, state and local income taxes, those are things you can deduct. The probability is most people’s deduction, if their married it is not going to be above $24,400. If they’re head of household, it’s not going to be above $18,350 and either single, married and filing separately, it’s not going to go up $12,200, those are the thresholds, those are the standards that the government gives you, and then if you have anything above that, you can’t itemize and claim that deduction.

But let’s say you’re a very charitable person, you give a lot of income, and your head of household say you had $30,000 in charitable of contributions. So, in other words you do plan to itemize. So, let’s see how this is going to affect your W4 withholding. So, here you enter the estimated itemized deductions. So, let’s say, we just set $30,000, is what we thought were going to do, because we’re going to have $30,000 in charitable. And then, here we’ll enter… We said we’re married, filing jointly, from part one, so we enter the $24,400 from here, because it tells you what to enter for your balance status, and then if subtract line two from line one if zero or less. Enter zero, so we subtract line two from line one, we don’t have a zero we actually have $5,600 then we enter an estimate of 2019 adjustments.

So, for you as a business owner, you have what you call the qualified business income deduction, or if you’re over 65, you also have an additional standard deduction for age of blindness. So, let’s say you’re under 65 and you’re a business owner who plans to make about… Maybe you’re going to make $100, and you get 20% of that. So, the qualified business deduction will be $20, and then, so basically, you add lines three and four, which we 5, 6, 2, 0. And then if you have estimated income that is non-taxable… For example, exempt interest, or anything you can enter that there. So, in this case we have nothing, we don’t have any non-wage income that’s non-taxable. And then we subtract, if we had anything here, we’ll subtract but we have nothing, so we come back here, and then we’ll see, the 5, 6, 2, 0. So, we divide the amount on line seven by $4,200 and enter the result here. If a negative amount, enter in paren. So, it’s not a negative, it’s going to be a positive, it’s going to be one point something.

So, we just take one. So, enter the number from a personal loss exemption, from line eight. So, remember from part one we have seven, then we add lines eight and nine. So, here we’ll stop here if we don’t have any additional information like we’re not a two-earner house, or we don’t have another job, but that’s not our case, ’cause remember, we’re married, and we also have a business. So we also have to take account of that. But if that was the case, we’ll have stopped here. Then we’ll go up here and enter eight, first we had seven. But now, our total’s actually eight because we’re taking into account the additional deduction.

In the next video, I will show you how to take into account the additional income.

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By |2019-03-11T22:39:19+00:00March 20th, 2019|Tax Planning|Comments Off on Fill Out W4 To Maximize Monthly Income Without Paying IRS At End Of Year

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