Income increase

[andresdelosrios]

Hello,

I may have a good problem with my income this year. I was laid off from my work due to restructuring but received a good severance package. On top of that I received my final check and vacation payoff, which was a good amount as well because I had many vacation days accumulated. I was fortunate to find another job immediately that pays even better than the previous one. According to my calculations, I may be pushed into the top tax brackets this year. I tried to mitigate this by maxing out my 401(k) contribution but I still think I'm going to be in a top bracket. I am a single tax filer and I filled the W-4 at my new job as such, which is just checking a box without entering any other information.

Is there something I can do to improve my tax situation, either on my W-4 or elsewhere?

[mtran7]

Hello andresdelosrios!

Congrats on our good problem!

The Turbo Tax W4 tax calculator tool can help you determine how to fill our your W4  https://turbotax.intuit.com/tax-tools/calculators/w4/

Once you fill out the information you can make adjustments for additional withholding if needed by using the slider. I've included a screenshot of what this looks like. 

I hope this helps!

Melissa 

[OpeA1]

Hello!

Well, congratulations on landing a new job s fast!

Maxing out the 401(K) is a great move to reduce the amount of taxable income at year end.  If you own a home, then you can take the property taxes, interest as deductions, as well as donations, etc. Here is a list of other deduction allowed by the IRS: https://www.irs.gov/credits-deductions-for-individuals 

Regarding the W-4 withholdings, I suggest you use our free tax calculator to estimate your withholdings and based on your findings, you can make estimated payments directly to the IRS or increase your withholdings by filling out a new W-4 and increase it in #4, by amount.

Here is the link to our free tax calculator: https://turbotax.intuit.com/tax-tools/calculators/w4/ 

Thank you for using TurboTax!

[JaneX]

The TurboTax W-4 calculator will take care of your regular job income withholdings.  If you switch jobs during the year, enter 2 part-year jobs when you use the calculator.    As for the severance package, sometimes employers count them as supplemental income, and the standard withholding rate is 22%.  If you think your marginal tax rate is in the top bracket (37%), you might want to send in extra or save some money to pay the taxes.