I have been reading some of threads today, and I saw one of the experts suggest that a good way to handle 2 earner households is for both people to mark "single" on the W-4s. I'm wondering if this is a good solution for me and my spouse. We both work, but one of us makes almost double what the other makes. Also, we will have unexpected income this year because one of us is inheriting investments from a family member. We really don't know what the dividends and/or capital gains/losses from these investments will be. I would be interested to hear any suggestions about how to handle our W-4s.
Hi @myo1 ,
This is a good suggestion to use Single "0" on the W-4 for a two earner household to make sure there is enough withholding to cover the increased income as a result of two people earning.
There are many factors that impact the taxable income, hence the tax on your income.
The best way to gauge where you stand tax wise for a particular year is to use the W-4 calculator. Below are two W-4 calculator tools that will help you determine if you should change your withholding on your W-4 to account for the extra income from inheritance.
In case of doubt, it is always beneficial to have a little extra withholding. Additionally, you can have your employer withhold an additional amount (fixed dollar amount every paycheck) on top of your standard withholding to cover taxes for additional income.