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I am currently utilizing the IRS Withholding Calculator to figure out what my allowances should be (note: NOT exemptions).

My current situation: First half of year up to June 30, I earned 11,700. The tax withheld federally on this YTD is 1220.

Starting July 1, I moved onto to a new role which will have salary of 60k. My allowance is currently set to 0 and in my first paycheck with this new role, 199 dollars was withheld from federal tax. However, since half the year is over, I will be making 30k until December 31. Therefore, my total earnings for 2013 would be 41.7k.

In the IRS Withholding calculator, it allows you to put in this same scenario - basically that I held a job in the first half of the year, how many taxes were withheld there, and now with my current job. I put all this same info in.

My Adjusted gross income is probably a little under 41.7k as I don't have any student loan, etc anything to worry about.

*I am single *I am paid weekly *No one claims me as a dependent

When I put all these bits of info into the IRS Tax Withholding calculator, it says I should set my allowances to 14 because my YTD tax payments is already met and so basically to catch up, I should set it here which will result in no federal tax being withheld for the rest of the year.

Based on the information you previously entered, your anticipated income tax for 2013 is $0. If you do not change your current withholding arrangement, you will have $5,976 withheld for 2013 resulting in an overpayment of $5,976.00 when you file your return. If you want your withholding to more closely match your anticipated tax, adjust your withholding on a new Form W-4 as follows:

For the only job you entered (which has a projected salary of $30,000): 14 allowances.

Check the “Single” box on your Form W-4 Assuming this recommendation is in effect for the rest of 2013 your expected refund should be about $1,400. Following this recommendation will ensure that the amount withheld from your wages will cover all of your projected tax liability while minimizing your refund.

This sounds absolutely wrong for some reason. In total for the year so far I've paid about 1400. And now the calculator tells me to not pay anymore federal taxes so that I would get a "minimal" refund next year. Can someone please confirm this/point me in the right direction?

P.S. I went into the calculator again and set it as if I just got my new job from the very beginning of the year (Jan 1). And I set up the numbers and even put that I had ZERO taxes taken out to year so far. And this calculator said to put the allowances to 22 and said I already paid my anticipated tax for the year. Is this some joke? the IRS Calculator seems absolutely incorrect on all fronts.

Why would a single person, no kids, very simple deductions, etc ever set the federal allowances for more than 3 or 4 is beyond me...

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  • What did you pay last year? Not what did you have to send them in April, but what was the total amount of taxes you had in 2012? If you make sure you have more than that withheld this year, then even if you guess wrong hand have too little withheld because of the two jobs and the overtime, you will avoid the penalty and the requirement to file quarterly next year.
    – mhoran_psprep
    Jul 14, 2013 at 0:45
  • Last year I was a part-time intern working 15 hours a week. And my parents claimed me as a dependent as I was still in school. I actually got 300 dollars back. It was set to 0 allowances. I didn't worry about this stuff at all last year since my parents handle it all for me/was in school/just an internship. Also, I think you've mistaken the "two jobs" portion. I am only working ONE job at the current moment. It's just that for this year, the first half of it, I still had that same internship (working 15 hours a week). Just now, in July, I was finally offered the full time role.
    – SuGo
    Jul 14, 2013 at 0:49
  • And Hence I went from an intern pay to working very limited hours, I now work full time + overtime at a much higher pay grade. Thus, I am trying to get the most money up front rather than giving the government a loan free interest and banking on a refund check. However, considering I started this full time role half way through the year, I am confused as to what would be my optimal number of allowances. I went from making 360 per week (pre tax) to 1153 (pre tax) now + eligible for overtime which I will have to put in so it's actally more than 1153. IRS calc says to use 14 allowances.
    – SuGo
    Jul 14, 2013 at 0:53

1 Answer 1

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The W4 produces a single number. Payroll takes that number and tax filing status, of course, and applies it to your weekly pay. The problem you see is that there's no accounting for the partial year worked, that has to be accounted for by the W4 itself.

Let's look at your numbers, $42K earnings less $10K standard deduction/exemption, and you'll have a taxable $32K. Your tax will be about $4350. So you'll need $3130 more withheld. $120/week. The $199 withheld from the first paycheck is a bit high, but only by $79. 8 allowances will avoid tax on $3900*8 or $31,200 annualized. $15,600 for the 6 months, $2340 in less tax or $90/wk. I'd go with 6 right now, and drop it to the right level near the end of the year.

There are a few links I am going to offer you, to better understand the process and have the details you need to get really close to the exact number:

How to Change Your W-4 Withholding to Maximize Your Tax Refund - An article I wrote that goes into detail on the W-4 process.

2013 Tax Rate Schedules and 2013 Tax Figures Adjusted for Inflation are tables at Fairmark Tax Guide. For a simple tax return, the tax calculation is a tiny bit of math, subtract the standard deduction and exemption ($10K exactly for single in 2013) and look at the tax table to see what you owe. Last, Circular E is the document that will tell you what withholding will result from the allowances you declare. This is a clip of one page:

Circular E

Pull the full doc, and you'll see it has tables for up to 10 allowances, higher income and the calculations for other situations.

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  • I see. So basically, I need to put out 120 a week for the next 6 months to meet my total of "about 4350" to break even with taxes. Hence, an allowances of about 6 should give me this for the remainder of these 6 months. Correct? Also, could you please give me a suggestion as to what I should do when the new year starts (and I'm not switching around jobs and it's just 60k). I don't care for a refund, just want the money up front. Also, could you please elaborate on the "8 allowances will avoid tax on 3900*8" - I didn't understand that part. Thank you. Why is IRS calc. saying 14 allowances?
    – SuGo
    Jul 13, 2013 at 19:37
  • Also how did you come up with "about 4350" taxes to be paid in total? What would it be for 60k?
    – SuGo
    Jul 13, 2013 at 19:45
  • Ok. I just set it up through my HR dept. and just set it for 5. This will be safe and I probably won't overpay too much in taxes/minimize refund. Would you agree? And of course when January rolls around, I'll modify it to 1 or 2 or whatever when that time comes. Or should I go with 6 or 8 ? My weekly paycheck is 1153. But some weeks I will do Overtime so it could be 1200-1300 or even 1400 depending on the week. The reason why I'm confused is because January - June I was making 18/hour (internship). Now I got the full time role which is 29/hour. First half was 0 allowances on intern pay.
    – SuGo
    Jul 13, 2013 at 20:24
  • Well my standard 40 hours will be 1153 per week. But realistically, my pay is more so to be 1200-1400 per week from overtime. So considering that, you think I should set allowances to 6 or 7? I rather be on a somewhat conservative side as to definitely not owe but high enough so that I can make a pretty close to even wash come tax time. (and of course this is all the remainder of the year which is 6months left; first 6months was a much much lower pay grade at 0 allowances. so I'm trying to play catch up now).
    – SuGo
    Jul 13, 2013 at 22:16
  • @user1985793 - If you have too little withheld, you can have a penalty. Too much, and you're out a bit of interest and use of the money. I added more to my answer above. I hope the links are helpful.
    – JTP - Apologise to Monica ♦
    Jul 14, 2013 at 13:08

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