W-4 withholding with tuition

[Jawad-2002]

Last year I was told by my HR to submit a w-4 with exemption of federal taxes (very wrong of me to do). I was earning about 10k income with 22k tuition assistance from my employer that gets added to my taxes income at the end of the year.

My employer pays for the taxes on the tuition assistance at the end of the year but didn’t last year as I was tax exempt. I ended up owing too much federal taxes. 

Now, I went back and submitted a new W-4 and unchecked the box about tax exemption so I can be taxed. However I am not getting federal taxes taken out at all until I get about 550 net pay and it would only take out about 5 dollars. This is obviously wrong and I need to fix it.

The issue is that my employer adds the tuition assistance which is estimated to be 20k for this year at the end of the year and pays taxes on it. I am not sure how much federal withholding I need as I am not actually earning about 2/3 of the taxed income as it would be paid for my school as tuition. How much should I withold, can I make it a percentage amount or is it a flat amount and it will take a huge amount before my employer adds the the tuition assistance money at the end? 

sorry for any confusion I am still very new to paying taxes

[AskTxBrenda]

I know the W-4 is confusing. You can submit another W-4 after you see what the correct amount is you want taken out. Use the calculator I provided below.

If you still need more taken out then - 

Simply add an additional amount on Line 4(c) for "extra withholding." That will increase your income tax withholding, reduce the amount of your paycheck and either jack up your refund or reduce any amount of tax you owe when you file your tax return.

W-4 instructions - 

By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period.

If you have 2 or more jobs -

When filling out your W-4 forms, there are a few tips to keep in mind: For the job where you make the most money, claim all of the allowances you normally would on the W-4 form. For any other job that you have (your second job for example) claim zero.

If you want to owe the least amount when filing your taxes, you will claim 0 on the W-4, so the job will withhold at a higher rate. This is important especially if you have more than 1 job.

If you didn't account for each job across your W-4s, you may not have withheld enough, so your tax refund could be less than expected.

Calculator - https://apps.irs.gov/app/tax-withholding-estimator

Instructions - https://www.irs.gov/pub/irs-pdf/fw4.pdf

[Esther M]

Hi Jawad 2002,

I agree with that your tax situation is a bit complicated. It appears most of your income is the tuition assistance added to your income at the end of the year and you don't know the exact amount. Your best is to estimate or ask your employer how much tuition assistance you will be getting for the year and add it to your income and follow the steps in the below W-4 Calculator. Remember it's an estimate not the exact amount.

W-4 Calculator 

I hope this answers your question

[Jawad-2002]

Even if I figure out the amount I need taken out, my pay isn’t exact every pay check as I work hourly and average about 12-21 hours every week. Also for the tuition assistance that gets added at the end of the year to my income. My employer adds about 20k and pays taxes on them. How do I make sure they pay the right amount if I ask for a flat withholding? If I write 0 on line 5 will that fix it? Or can I ask for a percentage to be taken out at all times?

[Jawad-2002]

Hey Esther, if I do that, would it take a huge amount of my paychecks for the entire year? My employer will be paying about 20k plus my 10k income but the problem is they add and pay the 20k at the very end of the year so they pay about 5k in taxes all in one paycheck at the end and I am scared that I will be paying much of that taxes over the year rather than my employer paying it at the end

[AskTxBrenda]

Zero will take out the highest withholding no matter what your pay is for the pay period, If you still think you need additional withheld, then, Simply add an additional amount on Line 4(c) for "extra withholding." That will increase your income tax withholding, reduce the amount of your paycheck and either jack up your refund or reduce any amount of tax you owe when you file your tax return.

[Jawad-2002]

by the highest withholding, do you mean a percentage will be taken out each paycheck. If so, this is exactly what I am looking for. Would I still need to ask for a specific amount to be taken? I wouldn’t want anything extra to be taken out. I just want my paycheck to go back to normal before I messed by listening to my HR and doing my w-4 to be tax-exempt.

edit: I just checked and line 5 is actually the signature line so I am not sure where should I put “0”?

[Jawad-2002]

I am using the calculator and it is saying that basex on my income of 10k I shouldn’t be paying an taxes and I would be fine. However, my employer adds the 20k at the end of the year. Then I tried the calculator with 32k income with the taxes paid so far and it is saying that I would owe 2k so suddenly. So how do I make my w-4 be adjusting to be income. Keep in mind all of my other taxes are taxed fine and they get taxes alot at the end by my employer. Please help me

[JBedford]

Hi, @Jawad-2002 ! I would enter the $20,000 as "miscellaneous income" on the calculator. If you've already done that and it's saying that you will owe $2,000 at the end of the year, then you want to increase your withholding to cover that amount. Simply divide that amount by the number of pay periods remaining this year. Then, the easiest way to increase your withholding by this amount is under Step 4 of the W-4 form, item (c). Please let me know if this raises additional questions! 

[Jawad-2002]

Hey @JBedford, unfortunately there is noway for me to enter as miscellaneous income as it gets added to my income at the end of the year as taxable income. However, Thanks for the advice, that’s id what I am planning to do here. I am wondering why my other taxes are still fine. I pay a normal amount on them and they get taxed accordingly to my paycheck. Then when tuition assistance gets added. My employer pays the right amount of taxes on them too. Is there no way for me to make my federal withholding go back to normal like my other taxes or do I have to add extra federal withholding every paycheck to make it right?

[JBedford]

All of your withholding goes into one "bucket", it is not separated in any way based on different sources of income. So if you want to increase your withholding, the only way to do so is by revising your W-4, which will affect all paychecks afterward. Hope this helps!