Personal Finance & Money Asked by Matthew Stopa on March 24, 2021
I have a bit of an issue I can’t figure out. I am single, and my annualized salary would be about $140,000 as I make about $70 an hour. The issue is that I’m realistically only going to make about $35k for the year because I am working part time.
This creates a bit of a problem as one week I grossed $2,400 and only netted $1,600. In reality, based on my income I should be netting about $2,000 a week, at least for this week. Before 2020, this wasn’t an issue because you could claim an extra dependent.
Is there any way to fix this with the new 2020 W4 form? Otherwise the IRS is going to be holding a lot of money unnecessarily.
Step 3 of the new W-4 is where you claim dependents. Instead of putting the number of dependents, you put the total dollar amount of the tax credits you get from your dependents. But, this approach has the added benefit that you can put any number you want! The instructions for step 3 say:
You can also include other tax credits in this step, such as education tax credits and the foreign tax credit. To do so, add an estimate of the amount for the year to your credits for dependents and enter the total amount in Step 3. Including these credits will increase your paycheck and reduce the amount of any refund you may receive when you file your tax return.
You can instead put a value in step 4b, which is for deductions.
The difference between 3 and 4b is that 3 is for things that reduce your tax directly and 4b is for things that reduce your taxable income. In your case, you can use whichever one you feel is easier to compute.
Correct answer by prl on March 24, 2021
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