RE-Fin-54321
Dryer sheet wannabe
- Joined
- May 6, 2007
- Messages
- 18
Don't know if you can call it a tip, but just wanted to pass along some information to any newlyweds that just caught me by surprise.
Both my wife and I work relatively well-paying jobs in the corporate world. We were married last November and excitedly updated our W4 withholdings for 2007 to the "Married" status with 1 withholding allowance - this seemed to be the logical choice because it accurately reflected our filing status.
Throughout the year I noticed my federal tax withholdings seemed a little low, however this is just my second year working post-college and I chalked it up to the significant increase in my 401K contributions. I am always very on-top of my finances, but just let this one slide until this past weekend when my wife and I projected our income tax liability for this year to determine if our withholdings were on pace using the IRS.gov withholding calculator. To our surprise we are on pace to OWE ~$4,000 at tax time (about 25% of our total tax liability). Now this "surprise" isn't horrible because we are both very frugal and save a significant amount of our money, but it is definitely disappointing. We are planning on bumping up our withholdings for the remainder of the year to lower our outstanding tax liability come April.
After some brief research I found that the "married" status for withholdings came about when it was typical that just 1 spouse was working and your paycheck withholdings are calculated accordingly. Needless to say, withholding under the "married" status if both partners work will result in a drastic underpayment of taxes. Moral of the story is if both spouses work each should keep with the "single" status for withholding purposes - newlyweds keep this in mind . All in all I am not too distraught because who wants to give the government an interest free loan anyway? Just not a surprise I want others to encounter.
Both my wife and I work relatively well-paying jobs in the corporate world. We were married last November and excitedly updated our W4 withholdings for 2007 to the "Married" status with 1 withholding allowance - this seemed to be the logical choice because it accurately reflected our filing status.
Throughout the year I noticed my federal tax withholdings seemed a little low, however this is just my second year working post-college and I chalked it up to the significant increase in my 401K contributions. I am always very on-top of my finances, but just let this one slide until this past weekend when my wife and I projected our income tax liability for this year to determine if our withholdings were on pace using the IRS.gov withholding calculator. To our surprise we are on pace to OWE ~$4,000 at tax time (about 25% of our total tax liability). Now this "surprise" isn't horrible because we are both very frugal and save a significant amount of our money, but it is definitely disappointing. We are planning on bumping up our withholdings for the remainder of the year to lower our outstanding tax liability come April.
After some brief research I found that the "married" status for withholdings came about when it was typical that just 1 spouse was working and your paycheck withholdings are calculated accordingly. Needless to say, withholding under the "married" status if both partners work will result in a drastic underpayment of taxes. Moral of the story is if both spouses work each should keep with the "single" status for withholding purposes - newlyweds keep this in mind . All in all I am not too distraught because who wants to give the government an interest free loan anyway? Just not a surprise I want others to encounter.