Withholding question

quote:

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have 2 children and my wife works as well. Two jobs total between the two of us. I am filling it out as accurately as I can possibly imagine - two jobs, 2 dependents ($4,000 child credit). I am having ZERO federal withholding from my base salary checks but having around 30% withheld from my commission checks. WTF? Am I retarded or is this correct? What changed with the tax code? I’ve never really had this issue before and I don’t want to owe a ton of money at the end of each year. What do I do to figure out what should be withheld so I know how much extra to tell them to withhold?

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That’s how payroll withholding charts work, unfortunately. If you’re paid twice a month, the system will take your individual paycheck, multiply it by 24, and withhold taxes according. With your salary checks it thinks you’ll make less than your standard deduction (also the check where your healthcare and other benefits are probably withheld which lower your taxable income). With your commission checks it thinks you make those 24 times a year and withholds like a maniac. It’s “dumb” - it doesn’t care what you’ve been paid or will be paid, it just calculates every check by 24.

It’s always been that way too, FYI.


You should talk with a cpa and consider using steps 4b and 4c to your advantage. For example - You could put $600,000 in step 4b and the software will deduct $600k from the 24x calculation each paycheck, resulting in no tax withholding. Then, use 4c to withhold $800 flat, which would withhold $19,200 over the course of the year and cover your projected income tax, or at least try to cover 110% of your previous year income tax.

Long story short, payroll withholding on commission checks are a shite show and always have been.

The W4 always confused the heck out of me as well since commissions are to be considered.

We’ve changed the withholding amount a bit every year and settled on me withholding $700 extra per paycheck and we barely overshoot it and get a small refund every year.