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Message
2020 W4 ?
Posted on 1/30/20 at 9:55 am
Posted on 1/30/20 at 9:55 am
Can someone help me out with the new W4 form?
I want to fill it out to where I get $0/minimal taken out of my checks so that I can put them into savings for the year, earn some interest & then file+pay my taxes.
This new form is really different that years passed.
TIA.
I want to fill it out to where I get $0/minimal taken out of my checks so that I can put them into savings for the year, earn some interest & then file+pay my taxes.
This new form is really different that years passed.
TIA.
4
Posted on 1/30/20 at 9:57 am to Tigear
quote:So your plan is to pay interest and penalties when you file your Form 1040??
I want to fill it out to where I get $0/minimal taken out of my checks so that I can put them into savings for the year, earn some interest & then file+pay my taxes.
Posted on 1/30/20 at 10:02 am to LSURussian
Sorry, I'm not well versed on taxes.
For most of my adult adult life, I've had $0 taken out of my paychecks for taxes. At the end of the year, I gave all my stuff to my accountant & he filed everything for me. He's always had my savings account set up to take the expected amount in taxes out of my checking & we let it earn the interest over the year(s). Then used money in there to pay what I actually owe come tax time.
He died back in October (good life, natural causes). So, I'm having to do this on my own for the 1st time in nearly 3 decades.
For most of my adult adult life, I've had $0 taken out of my paychecks for taxes. At the end of the year, I gave all my stuff to my accountant & he filed everything for me. He's always had my savings account set up to take the expected amount in taxes out of my checking & we let it earn the interest over the year(s). Then used money in there to pay what I actually owe come tax time.
He died back in October (good life, natural causes). So, I'm having to do this on my own for the 1st time in nearly 3 decades.
Posted on 1/30/20 at 10:03 am to LSURussian
He's never mentioned (to my recollection) any penalties or fees associated with this practice. Was he shielding me from reality?
Posted on 1/30/20 at 10:10 am to Tigear
I'm not a tax expert but I've done my own taxes using TurboTax for a couple of decades and my understanding is if you owe a balance on your taxes over a certain amount when you file your Form 1040, the IRS also requires you to pay penalties and interest on the balance owed.
An exception is if what you paid in for withholding taxes is more than what your prior year's total income tax liability was you get the benefit of the "safe harbor" rule and aren't required to pay penalties or interest.
But if you don't pay ANY withholding during the year, that safe harbor rule doesn't apply to you.
Maybe your tax liability has never been over the minimum required for paying penalties and interest.
An exception is if what you paid in for withholding taxes is more than what your prior year's total income tax liability was you get the benefit of the "safe harbor" rule and aren't required to pay penalties or interest.
But if you don't pay ANY withholding during the year, that safe harbor rule doesn't apply to you.
Maybe your tax liability has never been over the minimum required for paying penalties and interest.
This post was edited on 1/30/20 at 10:18 am
Posted on 1/30/20 at 10:15 am to LSURussian
yeah, I earn less than $200k (I know, OT Poor) but I deduct everything I can given my line of work & volunteer efforts as well.
But this new W4 form is different from any form I've had before. I'm told it's new for 2020. I just need to fill it out for single, no dependents so I can get the LEAST amount taken out of my checks every 2 weeks.
But this new W4 form is different from any form I've had before. I'm told it's new for 2020. I just need to fill it out for single, no dependents so I can get the LEAST amount taken out of my checks every 2 weeks.
Posted on 1/30/20 at 10:23 am to Tigear
quote:On the surface it sounds like your tax liability would exceed any minimum that would protect you from penalties and interest.
I earn less than $200k (I know, OT Poor) but I deduct everything I can given my line of work & volunteer efforts as well.
If you're determined to go it alone, I suggest you at least go to the IRS.gov website and search for the estimated taxes worksheet which allows you to approximate your tax liability for the year. You fill in the blanks on the worksheet and the result will give you an idea if you are under-withholding to the degree that penalties might be applied.
There is one CPA who posts regularly on this board, LSUtoHouston (or something like that) who might chime in his opinion. If I were you I'd take his advice whatever it is...
Posted on 1/30/20 at 10:27 am to LSURussian
thank you very much. I'll stand by for him.
Posted on 1/30/20 at 10:29 am to LSURussian
quote:
Maybe your tax liability has never been over the minimum required for paying penalties and interest.
I doubt that. For reference, this year I underpaid by about $2500 and paid a $40 penalty.
Posted on 1/30/20 at 10:30 am to Tigear
quote:
I just need to fill it out for single, no dependents so I can get the LEAST amount taken out of my checks every 2 weeks.
Do you have more than $12,400 in itemized deductions in a year? If so, put the amount exceeding that in box 4b. Otherwise, leave everything at zero and sign it.
You can write "exempt" below box 4c if you truly want nothing withheld, but the IRS charges 5% interest, which is more than any savings account I'm aware of.
Posted on 1/30/20 at 11:25 am to Tigear
I just had to fill one out for my wife who is starting a new job. Everything I read about this new W4 said it was done for simplicity. bullshite, this thing is confusing. I am just going to see how much they deduct from my wife's check and request additional if they are taking too little out after the first pay check.
Posted on 1/30/20 at 12:20 pm to Tigear
quote:
Can someone help me out with the new W4 form?
I want to fill it out to where I get $0/minimal taken out of my checks so that I can put them into savings for the year, earn some interest & then file+pay my taxes.
This new form is really different that years passed.
TIA.
You can do that, but you need to look at 2018/2019 to determine how much total Fed taxes you paid (assuming in similar income range for 2020 with similar write off's, etc) but you still need to make quarterly estimated taxes and be within 90% of total taxes owed on your last estimated tax payment. I would at least pay a token amount per pay period via withholdings. With interest rates so low I don't see much upside in what you are considering.
Posted on 1/30/20 at 1:54 pm to Tigear
So, first things first. This new W-4 is meant to STOP exactly what you have been doing 
Ironically, it's also meant to prevent larger refunds. The idea of the new W-4 is to try to get withholding to more closely match actual liability, so your refund (or amount due) is smaller.
Having said that, the only way you are really going to be able to make this work is to put an amount on Line 4(b) that is basically equal to your annual pay minus your standard deduction. That will cause the wage income, used by your payroll system for withholding, to be zero, which will result in zero withholding.
Also, you could put a number on that line that is smaller than your total income less standard deduction, and that will result in some income being subject to tax.
But... if you didn't change jobs, you don't need to do a new W-4. Employers can't force pre-2020 employees to do a new W-4, and the schedules used by employers and payroll companies account for both old and new forms.
However, if you change jobs, or want to make any changes to your withholding, you need to do the new W-4 and get on the new system.
Ironically, it's also meant to prevent larger refunds. The idea of the new W-4 is to try to get withholding to more closely match actual liability, so your refund (or amount due) is smaller.
Having said that, the only way you are really going to be able to make this work is to put an amount on Line 4(b) that is basically equal to your annual pay minus your standard deduction. That will cause the wage income, used by your payroll system for withholding, to be zero, which will result in zero withholding.
Also, you could put a number on that line that is smaller than your total income less standard deduction, and that will result in some income being subject to tax.
But... if you didn't change jobs, you don't need to do a new W-4. Employers can't force pre-2020 employees to do a new W-4, and the schedules used by employers and payroll companies account for both old and new forms.
However, if you change jobs, or want to make any changes to your withholding, you need to do the new W-4 and get on the new system.
Posted on 1/30/20 at 2:00 pm to Tigear
quote:
For most of my adult adult life, I've had $0 taken out of my paychecks for taxes. At the end of the year, I gave all my stuff to my accountant & he filed everything for me. He's always had my savings account set up to take the expected amount in taxes out of my checking & we let it earn the interest over the year(s). Then used money in there to pay what I actually owe come tax time.
Look back at your 2018 (or earlier) tax return, and look for a Form 2210, or look for an amount on the line of your 1040 that says "estimated tax penalty" - the exact line number has changed over the years, but it's toward the end of the 1040.
The IRS charges you a penalty if you don't pay in enough tax "through the year" either through estimated payments or withholding. The rate varies throughout time based on underlying interest rates, but is currently 6 percent per annum. It is assessed essentially on a quarterly basis.
There are some exceptions - if your total liability after credits but before any payments is less than $1,000, as well as depending on your current year tax situation vs your prior year situation.
But as others have said... I don't know many interest bearing accounts that get better than 6%. I guess the stock market could get you better than that if it's a good year, that seems risky to me though. If the market loses money, you still owe the penalty.
Posted on 1/30/20 at 3:43 pm to LSUFanHouston
quote:
So, first things first. This new W-4 is meant to STOP exactly what you have been doing
Ironically, it's also meant to prevent larger refunds. The idea of the new W-4 is to try to get withholding to more closely match actual liability, so your refund (or amount due) is smaller.
that's what I was afraid of w/ this new form.
Uncle Same at it again...
Appreciate the advice.
Posted on 1/30/20 at 3:51 pm to Tigear
I'll say this.. Granted I've only been an accountant for 5 years... But I've never seen anyone do what you are doing to much success. You are better off just taking out what you owe normally.
Posted on 1/30/20 at 3:55 pm to SoFunnyItsNot
quote:
You are better off just taking out what you owe normally.
I agree. If you don’t pay anything all year you will have to pay a penalty come filing time that will more than likely offset any gains you made by not paying on time.
I think you might be misunderstanding what your prior CPA was doing.
Posted on 1/30/20 at 4:04 pm to Tigear
quote:
Uncle Same at it again...
When tax reform came out, which got rid of personal exemptions and gave us a much richer child tax credit, we knew the W-4 was going to have to change.
But they seem to have also considered ways to reduce the tax gap here.
Obviously, the government wants to get your cash on the front end, rather than chase you for it on the back end.
This was a way for them to increase compliance without increasing audit cost.
Posted on 1/31/20 at 10:38 pm to LSUFanHouston
LSUFanHouston. Without wasting too much of your time and providing free tax advice, how do you recommend estimating taxes for someone who's compensation is variable (e.g. wife is a physician paid off production)?
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