I am trying to figure out what I should enter in my W4 and want to use the IRS Withholding Calculator as a guide.
To that end, my information is as follows:
- We will file MFJ, with an income of $85k/yr and $5k signup bonus, starting May 1st 2013
- I worked as a contractor from Jan 2013 to March 31st 2013 earning a total of $15k with no taxes withheld (will make my ES payments on April 15th)
- My wife (as well as I? (since we were both students)) can claim the Lifetime Learning credit for tuition (so $1k as an estimate for this credit should be close enough if not less)
- We have no other credits or deductions to make besides the standard and personal deductions
When I enter this information into the IRS Withholding Calculator, it asks me to enter the number of deductions as 7 and tells me that ~$3k in taxes will be owed by me at tax time.
Now this is clearly a bad suggestion as the IRS will assess me a penalty for owing more than $1k at tax time?
How do I then use the IRS Withholding Calculator so I can fill out my W4 correctly?