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Tax Withholding

Tax Withholding

Old Jan 15th 2006, 1:18 am
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Default Tax Withholding

Hi

Can anyone tell me what the maximum federal tax witholding is? I claim married and 0, but what's the highest the zero can be?

Thanks

Paul
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Old Jan 15th 2006, 5:43 am
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Default Re: Tax Withholding

You mean dollar amounts, or number of withholdings?

Dollars are based on your salary using some strange formula that I've never quite worked out to my satisfaction. It gets especially tricky when filing married jointly with two incomes.

As for number of withholdings, I'm not sure if there is a formal upper limit, but there is a level (don't remember what it is - 10 perhaps?) that attracts considerably increased scrutiny from IRS.
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Old Jan 15th 2006, 1:27 pm
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Default Re: Tax Withholding

Originally Posted by immunise
Hi

Can anyone tell me what the maximum federal tax witholding is? I claim married and 0, but what's the highest the zero can be?

Thanks

Paul
Are you talking about the form (W4) you complete when you start a job? The "number" is the number of people you can claim as a dependent. It is generally your kids, but could be your parents (if they live with you and you support them) - you cannot include your spouse. The larger the number, the less tax will be withheld from your paycheck.

But come the day of reckoning (April 15th) if you have withheld too much money from the IRS you will have to pay them a chunk of change in taxes. They can also impose under-withholding penalties and make you pre-pay an estimate of the following years taxes.

Take a gander at this website. It's a great resource http://www.bankrate.com/brm/green/ta...s1-summary.asp
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Old Jan 15th 2006, 6:44 pm
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Default Re: Tax Withholding

Originally Posted by ScousePete
Are you talking about the form (W4) you complete when you start a job? The "number" is the number of people you can claim as a dependent. It is generally your kids, but could be your parents (if they live with you and you support them) - you cannot include your spouse. The larger the number, the less tax will be withheld from your paycheck.
The withholding allowances (line five of W4) represent not only the number of dependents, but are meant to represent what the total deductions from your income will be. This includes itemized deductions and other things that are deductible such as alimony. Each allowance is 'worth' a deduction equal to the amount of the allowance for a dependent (c $3300 in 2006). Thus if you claim 10 withholding allowances, you are telling the IRS that about $33k of your income is going to be deductible (there's a fudge to take account of the standard deduction, so that's not 'quite' true). You can also ask for an additional $ amount to be withheld in taxes on each paycheck. This is useful for getting your withholding about right by the end of the tax year, and dealing with unusual non-salary income.

I don't think there's any limit to what you claim, but claiming 10 or more is likely to get you IRS attention. I claim 16 and got a nice little letter from the IRS asking for justification. And of course if you underpay your taxes for the year through the withholding, you may be liable for penalties when you submit your return.

Last edited by Giantaxe; Jan 15th 2006 at 6:47 pm.
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