How Do I Change Tax Withholdings Without Exemptions
With the new W-4 I do not know what exemptions to claim since the older systerm was changed.
Before I was able to go into my employment information and claim 1 to 9 exemptions and change them at least 2 times a year. Now there is not that option. What do I claim?
Joshua Escalante Troesh, CFP | MBA
The newest IRS Form W-4 provides a new process to accomplish the same goal as exemptions did in the past. In fact, the new form more clearly connects setting your withholdings with the process you will use in April to fill out Form 1040 and file your taxes.
Use Step 4
Step 4(b) on the form allows you to enter anticipated deductions for your current taxes to change the amount withheld. Talk with your accountant, financial advisor, or review last year’s tax filing to get an estimate of your expected deductions for 2020. You can then enter that deduction into line 4(b) to reduce your withholdings. Entering a larger deduction amount will reduce withholdings more.
Getting an Exact Withholding Number
Additionally, by increasing your estimated deductions and then entering an extra amount to be withheld on line 4(c) you can more accurately withhold your desired amount for taxes. As an example: say you wanted $1,234 withheld every paycheck and putting $24,000 in deductions (line 4b) set the withholding at $1,100. Simply enter $134 (1,234 — 1,100) on line 4(c) to witthhold the amount you wanted.
Estimating Withholdings for Differing Deductions
Your payroll department should be able to advise you on the amount to be withheld with differing deduction amounts. All they would need to do is run a few different deduction amounts through their payroll system to see how much would be withheld each pay cycle. As always, consider penalties for substantial under withholding of taxes when making these adjustments and you should run any numbers by your CPA or financial advisor.