W-4 with a raise and a bonus

[JosephCal615]

My wife and I file jointly, and have no dependents. We got hit with owing a lot last year. It's pretty obvious we need to adjust our W-4s.

She's a teacher. Her district just settled a contract dispute. Teachers in her district got raises, of course. She also received back pay in the form of a bonus.

I want to make sure I use the W-4 Calculator correctly. I run into a few problems when I do. The salary estimate never matches what er actually make.

Also, I want to make sure the bonus is treated correctly when I estimate. Would it be included in my salary, or added later, in the bonus blank?

I also had another issue that I saw after I filed. I don't know if this would have an effect on the amount owed. We did the estimator for Itemized vs. Standard deductions. It was determined that standard would be better, so we selected that.  However, the return for 2022 has us itemizing our deductions. I am wondering if this would be something to look into. Thanks.

[KarenL4]

Hi,

I am not sure you are using our W-4 calculator.  If not, may I suggest you try it?  If the bonus was already paid, you can include that value in your YTD compensation. 

For future bonuses, they may not be reflected in your estimate of what you were making for the year and can often result in under withholding, so good you are keeping an eye on it.  As to bonuses, the standard federal withholding on supplemental payments (a bonus is a supplemental payment) is 22%.  That may or may not be enough.  To decide, assuming all other things are relatively the same as last year, check your tax bracket (or marginal tax rate).  If it was higher than 22%, you may be under-withheld and can consider asking the payroll department to withhold more on that bonus (to get to your marginal tax rate)...  

If you are feeling uncertain, you can always double check things using our Tax Caster.  It can be helpful to use it once a quarter to see if you are on track. If you find you are under withheld, you can catch up by increasing your W-4 to withhold that amount over the remaining pay periods.  For example, if you were under withheld $1000 and you have 10 pay periods remaining, you can submit a new W-4 with additional withholding of $100/pay period.  That may not be perfect but can get you closer...

If you have additional questions, please post below. 

Please give a thumbs up to cheer below if this answer helps!

Best,

Karen

[JosephCal615]

This was not a lot of help. According to the estimator, we WILL be getting refund. We have not made changes to our W-4, and I know that changes need to be made.

I likely need to set a higher amount to be withdrawn. My wife show 2 exemptions on her paystub, which is not correct (we are married with no kids) and a filing status of S.

There was not really anywhere to acknowledge that in the estimator.

[Critter-3]

You BOTH need to fill in new W-4 forms since there are no more "exemptions" anymore ...

Use the Tax Withholding Estimator on the IRS web site to figure out what you and your spouse  should each put on the W-4 forms that you give to your employers. It's much easier than using the worksheets on the form. It will let you adjust your withholding to get the approximate refund amount that you want.

[lferlazzo]

hi crazy. note the turbo tax w-4 also allows the option to change withholding to your projected refund.  In additon, if you used our product this year and had the live feature, we will glady answer your question and walk you thru the w-4 calculator , as well as turbo taxcaster.  we are open from 5 am- 5pm pacific. Agents such as myself are always avaialble to assist with your questions.

[JosephCal615]

"Hi crazy?" I'm hoping that was a typo.

[KarenL4]

I am positive it was a typo! You know how autocorrect can be!