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...