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Is there a way to best determine which number we should list for withholding on our W-2?

By: Rick Gossett

 

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Is there a way to best determine which number we should list for withholding on our W-2?

Answer:  Determining withholding allowances: If you and your spouse have W-2 jobs, then it is advisable for both of you to complete Federal Form W-4 and its worksheets and your state’s Form W-4 at the start of every tax year to determine the proper number of withholding allowances to claim. Completing the Form W-4 worksheets may require you to prepare a mockup of your personal Form 1040 for the current tax year, including Schedule A, Schedules C and SE for your home-based business, and any other required forms and schedules.  You can then use this mockup to complete the Deductions and Adjustments Worksheet that accompanies Form W-4 to determine how much withholding allowances to claim.
Picking an arbitrary number of withholding allowances to enter on Form W-4 is a recipe for disaster, particularly if you do not have a clear picture of your personal income, deductions, exemptions and tax credits.  It is vital that you estimate these items to make sure you are not under withheld and facing a large balance due when you file your returns next April.
While you can determine your withholding allowances on your own with a mockup of your personal Form 1040 and the W-4 worksheets, you may find it beneficial to review your particular circumstances with your tax advisor or CPA.  Your tax advisor can review your income and expenses in detail and help you project your taxable income and tax liabilities and determine the proper number of withholding allowances to claim. You can review Form W-4 and instructions at the following websites (your state’s Form W-4 can be found at the state department of revenue’s website):
Published: June 4, 2013
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Rick Gossett

As COO of Tarkenton Companies for more than 20 years, Rick has been responsible for business software development, unique partnerships, business educational content and consulting, and more. Rick was the originator of Tarkenton Companies’s consulting service and initially handled all of the questions himself. Prior to joining Tarkenton Companies, Rick owned and operated a private practice as a CPA. Prior to that, he was a Senior Manager at Pannell Kerr Forster in tax and audit, as well as Principal in Ernst & Young's small business advisory group.

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