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Author: MrDP Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Withholding allowances for Federal Income Tax Date: 5/2/2000 7:40 PM
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I asked this question on the board a few weeks back, but some new developments have surfaced. Here's the situation once again for the year 2000.

My wife and I are married, filing joinly. In June, I will be out of school and my gross pay will increase from about $1200/mo to $4166/mo. I will also be receiving a signing bonus of one month's gross salary for starting my new job. I also have a $5000 award from the school I attend added to my income.

No federal or state tax will be wittheld on the $5000 award.

I figured out that I need the IRS to withhold $600/mo from my gross pay once I start the new job. That is based on what my wife's salary and withholding is, and what my withholding and salary has been up to this point in the year, as well as the $5000 award and the $4000 signing bonus.

I have looked over IRS Pub 505 and attempted to use it to figure out how to fill out my new W-4 form to get close to the correct withholding amount, with little success.

So my first question is: is there a web site out there that will let me play with different withholding strategies. For example, a web site that would let me see what the withholding would be for married/jointly with 0 exemptions vs. single with 1 exemption, etc.

I could always claim married with 2 exemptions (my wife and I) and then ask for additional withholding, but it would be nice to get the correct withholding amount from the get-go.

Second Question: IRS Pub 505 mentiones fines if you claim too many exemptions. Am I allowed to claim two exemptions (one for my wife, one for me) without being penalized.


Thanks,
MrDP
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Author: MrDP Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 35305 of 121061
Subject: Re: Withholding allowances for Federal Income Ta Date: 5/2/2000 7:42 PM
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Oh yes, I forgot to mention that my employer won't just withhold the $600, I have to fill out the W-4 and either have withholding taken out at the single rate or the married rate with x number of exemptions. The employer did state that they will withhold extra money, but I must file the W-2 as either single or married.

MrDP

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 35307 of 121061
Subject: Re: Withholding allowances for Federal Income Ta Date: 5/2/2000 8:44 PM
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It shouldn't make any difference. If it's a new employer, they withhold as though that $4166 a month has been paid through the year. If it's the same one, they should be changing their formula. Also, for the $5000 bonus, that's roughly 2 exemptions of $2750 each, so just decrease your claimed exemptions to zero on your new W-4. Since you are changing your withholding partway through the year, you may end up owing a bit. That's OK, it's what you want to do unless you are a spendthrift. Also, go as married, that way you will not be surprised by the "marriage penalty" that I think has not been rescinded yet.

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Author: jaff Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 35834 of 121061
Subject: Re: Withholding allowances for Federal Income Ta Date: 5/21/2000 7:24 PM
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Hello. For your first question, you're in luck. Don't know though if you still need it because it's been a while since you posted this message. Here is the URL for an online payroll calculator. I found this the other day when I couldn't wait to see my next paycheck.

http://www.sacbiz.com/dlwco/payrcalc.htm

Good luck!

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