I'm getting a nice big once-a-year bonus at the end of this month, but the gov't taxes the hell out of it and swoops away half of it, as if I made that much every 2-weeks or something, like I'm in the top income bracket! I hate having to wait until the end of the year to get my money back... and just let the US Gov't earn interest on my bonus!

is it a bad idea to up my W-4 allowances to say, 10, for this one check and then reduce it back to normal afterwards? it's not like they audit the allowances on W-4s right? they only audit you at the end of the year, if you try to elude paying taxes on earned income. but they'll see from my W-2 how much I earned, how much I paid, and bill me for the difference... which I'll happily pay... 1 yr from now.

 

You are forgetting they will also fine you for not paying last year AND charge you interest on the difference...better of going the legal route.

You need to set up a business of your own for tax write-offs.

 

well I'm thinking their taking 50% of this paycheck is in error since the computer sees how much I'm being paid, multiplies that by 26 (since I'm paid every 2 weeks), and then sees that I'm in the top tax bracket so it guts my paycheck. I'll end up getting it back in the Spring of 2006... but it should never have been taken from me anyway!

I feel like it's a computer error, not a proper tax collection.

 

well, I just spoke to my boss, and he said if you're a single guy with 9 or more allowances, the IRS automatically audits you. so that's a no-no.

 

so what is a good number to use on the W-4? i'm starting a new job soon and wonder - this year i'm getting back a whole lot of money because of the mortgage write-offs, and i don't like the govt. keeping that for the year...it's like an interest free loan to them.

 

well last year I had accidentally claimed 1 more exemption than I should have, and nothing came of it. this year I fixed it... and just now I unfixed it. I think +1 isn't too bad.

of course, without any big bonuses, you will end up owing at the end of the year. a little money management fixes that however.

 

Who handles your payroll? Is it one of the big two (ADP or Paychex)? I would hope their computer systems would be able to handle special situations like yours.

Of course if your company handles all that stuff themselves, I guess you're pretty much SOL. Seriously though, unless it's a huge bonus, it's not that big of a deal, IMO.

[SPAM]Here's how I see it: lets say your bonus is $5000, and they withold $2500 instead of $1000. that's a $1500 difference, which is $1500 you could be earning interest on if the witholding was done correctly. assuming 2% APR, that's about $30 you're losing for the year, not that huge of a deal (though I admit it does suck to get a bonus so early in the year))[/SPAM]

 

401k is your friend

 

And irrelevent, in this case.

 

what if it's a $50K bonus, but I'm only paid minimum wage the rest of the year?

see??? life sucks then doesn't it? ok then.




actually... your 2% APR is not correct, because this would be used to pay down debts, which cost me a higher APR. and also, INGdirect's MMA is currently paying a nice 2.35%