Can I calculate next year's exemptions based on this year's refund/amount owed?

Question

Every W4 calculator I've found makes you input a lot of data to figure out what next year's exemptions should be.

Let's say I already take 10 exemptions and I owe, say, $5000 this year.

Is there a simple formula or rule of thumb that would tell me to remove N additional exemptions from my W4 to withhold around $5000?

(For simplicity, let's assume the new exemptions would be applied to the entire new year.)

JTP - Apologise to Monica · Accepted Answer

Circular E, Employer's Tax Guide, aka, Pub 15, contains the tables that payroll uses. Go to the page with your income level, and confirm that your 10 allowances match to the column for withholding per paycheck.

I'd then reduce the allowances accordingly. $5000 is the tax on about $23K (at 22% bracket), so dropping allowances by 6 (each allowance is $4000 or so) is probably what you need to do.

Note : Doug's answer works, too. I'm a fan of first using the allowances to get to the right withholding and using the "withhold more" line to fine tune if still off by a small sum.

Doug Deden · Answer

If you want your employer to withhold more, you don't want to increase what you are calling "exemptions". (They are officially called "allowances.") If you increased them, your employer would withhold even less, so you would owe more at tax time next year, all other things being equal.
To have your employer withhold more (so you don't owe as much at tax time next year), you can use line 6 of the W-4. Line 6 is "Additional amount, if any, you want withheld from each paycheck". Assuming you have 26 paychecks per year, and you want to have an additional $5000 withheld, enter $192.31 on line 6. ($5000 / 26 = $192.31) Because this year is already well underway, you will have to adjust the denominator to reflect the number of remaining paychecks for this year in order to achieve an additional $5000 of withholding.

Can I calculate next year's exemptions based on this year's refund/amount owed?

2 Answers

Add your own answers!

Ask a Question