My employer will withhold taxes from my paycheck as if I have been working at a particular salary range all year. Basically: pay period = (base salary / 2080 hours) * 80, and taking all taxes as a percentage of that number. This will equate to 37% withheld per paycheck.

I know how much I will make from them for the remainder of the year, and therefore I know the taxes I will owe on that amount.

The taxes on that amount, divided by the applicable pay periods of the year concludes that 26% of my paycheck should be withheld per period.

How do I tell the employer exactly what amount to withhold?

I will be able to make better use of the money now, rather than allowing the government to hold it interest-free for that amount of time. For instance, I could contribute the money to a Roth account in this tax year, instead of waiting for a refund next year.

Note: I do not have additional allowances to make on a W-4; I just know how much I will owe all authorities by using division.

Note: I have the capital to pay any possible misbalance when filing income taxes in March next year.

1 Answer 1


Employers withhold at rates specified in Circular E issued by the IR. You can request that additional money be withheld (not an issue here) or you can have reduced withholding by claiming additional allowances on a W-4 (i.e., more than just for you and spouse and dependents) if you believe that this will result in withholding that will more closely match the tax due. (Note added in edit):Page 2 of the W-4 form has worksheets that can be used to figure out how many additional allowances to request.

Also, I wonder if your withholding will be 37% or final tax bill be 26% of your adjusted gross income. The tax brackets are the tax on marginal income. If you are in the 28% tax bracket, you owe 28 cents in tax for each additional dollar of income, not 28 cents in tax for every dollar of income. Your overall tax might well be less than 20% of your income. As a specific example, in 2011 a married taxpayer filing jointly would be in the (highest) 35% tax bracket if the taxable income was $379,150 or more (marginal tax rate of 35% is applicable to every dollar more than $379,150) but the tax on $379,150 itself works out to be $102,574 or 27.05% of the taxable income. So if you do expect to be earning around $350K or more in salary between now and December 31 to hit that 26% that you expect you will owe, you might want to consider paying a tax accountant for advice on how to fill out your W-4 form for your new employer rather than relying on an Internet forum such as this for free advice.

Note added in edit: Your comment "... it is a cocktail of ... federal taxes, state taxes, local taxes, health care ..." on the earlier version of my answer does raise the question of whether you want your employer to withhold 26% instead of 37% and have the money go to meet all these obligations or just 26% towards your Federal income tax liability only. The Federal W-4 form affects only how much money is withheld from your paycheck and sent to the US Treasury. Some of the money that each of your employers withholds (Social Security and Medicare taxes) is not affected by what you put down on the W-4 form. Now, if you hold two jobs and the total income shown on your W-2s is larger than the SS limit, you will have had too much Social Security taxes withheld, and the excess will be a credit towards your Federal income tax liability. You have self-employment income too on which you owe Social Security and Medicare taxes and you are making estimated tax payments. The excess Social Security tax payment can count towards this too (as well as income tax on your Schedule C income). Thus, if your new employer is withholding too much, you might be able to skip making the fourth quarterly payment of estimated tax or make a reduced payment (there is no requirement that the four installments must be equal). In short, there are lots of ramifications that you need to take into account before deciding that 26% is the right number. Instead of filling out a W-4 all by yourself right away, I strongly recommend reading up a lot on income taxes, or play with a tax preparation program (last year's version will do a pretty good job of at least getting you in the right ballpark), or consult with a tax accountant.

  • Thank you dilip, although this has nothing to do with the marginal income tax rate. It is a cocktail of properly computed federal taxes, state taxes, local taxes and health care. when I do my taxes next year I will factor in investments and the another portion of my earnings subject to self employment tax - and as such I already am obligated to estimate my taxes. the amount I will earn from this employer is the only one in question, as they will simply be withholding the improper amount.
    – CQM
    Sep 18, 2012 at 2:21
  • my real question then is: I didn't realize you can claim more allowances on the W-4 if you aren't actually the things the W-4 asks (ie head of household, married, dependents). Where on the form do I just write my custom allowance down after seeing that it will make my withholding more accurate?
    – CQM
    Sep 18, 2012 at 2:22
  • 3
    @CQM See Page 2 of the W-4 form for how to proceed if you have multiple sources of income including spousal income, itemized deductions, etc. Sep 18, 2012 at 2:26
  • The "brute force" method is to refer to the Circular E, find the withholding you want, in dollars, and submit for the number of allowances to get that withholding. Note - while a withholding allowance is equal to a dependent exemption, so is $3800 of mortgage interest, charitable donations, state income tax, etc. Sep 18, 2012 at 15:07

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