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My wife got a job as an English teacher. She will be paid on an hourly basis depending on the number of students, classes, etc.

When it was time to fill in her W-4 we weren't sure about what to write on item 6 (page 1)

Additional amount, if any, you want withheld from each paycheck

I know we can write "0" (zero), but ideally, since I am high earner, we'd want to withhold a high percentage of her salary. However, anything we write here may be too much or even too little, depending on how much money she made on each particular paycheck. It would be good if we could write something like 25% or 30%.

Any thoughts?

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It starts here -

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You said you are a high earner, but high is relative. This tax table will show what marginal rate you have for your taxable income. Look at your 2015 return to get a better idea what "taxable" means, vs gross income. For starters, with a standard deduction, and just the two of you, $20K comes off your gross. Even so, let's assume you are in the marginal 25% bracket.

The W4 form does offer instructions on how to calculate how much extra to withhold, but, to your point (and brilliant criticism of the process) withholding is not available as a percent, only as normal withholding, i.e. if spouse's income were a flat, predictable number, or as an extra, fixed, number, per check.

You shared with us in your other question she expects to earn $7K-$15K. The average of these 2 numbers is $11K, which at 25%, is $2750. I'd divide that over the number of checks remaining this year (20?) and just withhold that much extra. Use your tax software from last year or an online calculator and in 3 months, see if you are on track. You can adjust the W4 any time to get as close to the actual total year tax due as you'd like. My answer focuses on the 'adjust repeatedly,' part of keshlam's own answer. His quarterly payments suggestion also works and you might prefer it. In general, mine would only take 1-2 adjustments per year at most.

If you withhold too much, as most people seem to do, you'll get it back when you file. But, worst case, you withhold $3750 and she makes just $8000. This is $1750 too much. The average refund is over $3000. Too little, and mhoran's answer explains when you'd owe a penalty.

  • Brilliant! Thank you again Joe. What happens, though, if we write down, e.g., 300 dollars, and she receives a paycheck worth 250? Will she just pay 100% tax then, and we'll have to wait for the next tax season to get the money back? – Hill Jul 22 '16 at 15:40
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    They withhold FICA (Both Social Security and Medicare) first, and then they'll take state/federal. I believe they just will take the balance if it's less than the extra withholding. I can see how that can happen with variable hours. But it should average over the year. It's up to you how often to use the calculator and track if you are on target. – JTP - Apologise to Monica Jul 22 '16 at 17:28
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Either make your best guess, or set it low and then file quarterly Estimated Tax payments to fill in what's missing, or set it high and plan on getting a refund, or adjust it repeatedly through the year, or...

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You have multiple things going on some of which will work in opposite directions.

  • This is a second job for the family so that their income will be added onto of the main income. This generally means that the 2nd income has too little tax withheld. The tax tables used by employers have no way of handling this situation.

  • This 2nd job is being started part way though the tax year, so too much in taxes is withheld. If they make 2,000 a month for 4 months that would mean 8,000 in income; but the tax tables used by the employer withhold at the $24,000 per year rate.

  • The third issue is the great variation in the number of hours per pay period. This means that too much is withheld in checks with the most hours, and too little in the ones with the least hours.

For this year you have a reprieve. As long as you make the safe-harbor levels for federal withholding, you can avoid penalties when you file next spring. To do so just make sure that the withholding of all the jobs in the family equal or exceed the total income tax for the family last year. Note this isn't equal to last years withholding, or equal to the refund last year, but the total tax you should have paid.

The general advice is to set the smaller income to have 0 exemptions, and use the W-4 for the larger income to make adjustments. In the past I have done this to make sure that we make the safe-harbor level. You can make adjustments in the new year once you know what the safe harbor goal is for the rest of the year.

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