7 ms·

Oh yes, that's another fun one! Your yearly tax return should be as close to 0 as possible, otherwise you're either over- or under-withholding. Then again, I me

Oh yes, that's another fun one! Your yearly tax return should be as close to 0 as possible, otherwise you're either over- or under-withholding. Then again, I met some people that use it as a kind of piggy bank because they wouldn't be disciplined enough to save up for bigger purchases otherwise and... well, I can't even, but if it works for them, there are worse things to spend money on.

demondemidi 3y ago
I have income from multiple sources and they are not aware of each other. For example, they will all keep paying social security even when I’ve exceeded the max deduction. It is far too complicated to correct the finance departments of multiple companies. I just reconcile it all at the end of the year and get a refund. Got a better strategy I can use?
- positr0n 3y ago
  If your separate income streams are pretty predictable and so is the overwitholding, and if you care enough: you can put a negative number in the "extra witholding" box on your W-4. I wouldn't say this is a better strategy, but you can definitely min/max this even if your income is not stable by extrapolating out your expected income and expected witholding a few times a year and adjusting your W-4 based on your calculations.
  - lupire 3y ago
    Wow I wouldn't trust that. I'd add extra exemptions plus a positive withholding if needed.
- dcow 3y ago
  Woah, it’s okay to have different tax situations. I started a business one year and got a pretty big refund. But we’re not out there bragging about how we get big refunds every year like it’s some goal to aim for and accomplishment to be proud of if achieved. That’s the mentality people are criticizing.
- lcnPylGDnU4H9OF 3y ago
  It sounds like you’re not one of the people they met who use it like a piggy bank. From my perspective, they’re just describing the habits of people who are used to not having any money: gotta spend this windfall quick because money doesn’t last long. It’s irrational and ultimately harmful but it’s borne from the practice of spending all of your money every month on non-trivial things and still being required to increase debt in order to stay in your apartment, e.g., credit card spending.
  - sfink 3y ago
    It's not necessarily irrational. For example, for some people if they ever have any extra money, someone else will immediately spend it for them. If the earner wants to make a larger purchase, perhaps something that will cost short term but pay off in the long term, they need some mechanism to save, outside of the regular controls that apply to daily life. You may think this situation is still irrational, that the other person is being irrational. But again, there are many life situations out there. Perhaps they have lived in situations where they had to fight for what they needed. Perhaps they lived with an earner who would spend their money on drugs if it wasn't taken away, and yet if the non-earner saved it up themselves, the earner would find it and spend it. The supposedly rational thing may depend on everyone around you to also be rational, and everyone around them, etc. And given that we are human, and humans are not fully rational...
- loeg 3y ago
  You can file a W-4 with exemptions and avoid overwithholding! This is a fixable problem.
  - demondemidi 3y ago
    How do I use a w4 to fix the social security problem without incurring underpayment of state and federal? Exemptions apply to all the taxes, no?
    - loeg 3y ago
      https://www.irs.gov/forms-pubs/about-form-w-4 https://www.irs.gov/forms-pubs/about-form-w-4 Fill it out correctly and your employers will do the right thing.
      - dpkirchner 3y ago
        I think the W-4 only applies to federal income tax. There's no field that instructs employers how much to pay in FICA (their share and yours). At best you can reduce withholdings to account for the excess FICA payments.
        loeg 3y ago
        It's all total tax burden. Dollars are fungible.
    - lupire 3y ago
      Not sure about state, but you don't pay Federal Income and FICA separately. They are just numbers that get added together. You just pay money, and the IRS splits it up after they collect. If you "overpay" Income by $1000 and "underpay" FICA by a $1000, you're done, no problem.
- phonon 3y ago
  FICA cap is per employer, not total. Is that what you're referring to?
  - sgerenser 3y ago
    FICA cap is not per employer. Well, it is from a withholding perspective (only because it would be impractical to make employers monitor withholding outside their control), but once you do your taxes for that year, you’ll get everything you paid in over the cap refunded.
    - phonon 3y ago
      Right, but employers aren't allowed to coordinate to calculate whether the hit the cap together or not. They don't have that discretion. See https://www.ecfr.gov/current/title-26/part-31#p-31.3121(a)(1)-1(a)(3) https://www.ecfr.gov/current/title-26/part-31#p-31.3121(a)(1...
dcow 3y ago
By the interest free loan logic, you should have your employer withhold zero and then you put your taxes in a high yield savings account and pay them all as late as possible.
- xur17 3y ago
  The IRS already thought of this - they charge you interest on the money you owed them (with some exceptions, like waiving it the first year it happens, only charging you if you withheld less than last year, etc).
  - MenhirMike 3y ago
    Yeah, it sucks that the IRS is such a buzz-kill here, with 4-5% HYSA's, it would be nice to just let all the taxes sit there and pay one lump sum in April.
    - xur17 3y ago
      I owed a decent chunk more one year due to investments I sold, and left the money in tbills since I knew I was withholding at least as much as the previous year.
  - sgerenser 3y ago
    The interest rate is also much higher than you can earn on anything risk free (8% right now) plus there’s penalties on top.
  - dcow 3y ago
    Not sure I understand. Taxes are due in April. You don’t get charged a year of interest on the amount you own when filing…
    - xur17 3y ago
      https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty https://www.irs.gov/payments/underpayment-of-estimated-tax-b...

demondemidi 3y ago

I have income from multiple sources and they are not aware of each other. For example, they will all keep paying social security even when I’ve exceeded the max deduction. It is far too complicated to correct the finance departments of multiple companies. I just reconcile it all at the end of the year and get a refund. Got a better strategy I can use?

positr0n 3y ago
If your separate income streams are pretty predictable and so is the overwitholding, and if you care enough: you can put a negative number in the "extra witholding" box on your W-4. I wouldn't say this is a better strategy, but you can definitely min/max this even if your income is not stable by extrapolating out your expected income and expected witholding a few times a year and adjusting your W-4 based on your calculations.
- lupire 3y ago
  Wow I wouldn't trust that. I'd add extra exemptions plus a positive withholding if needed.
dcow 3y ago
Woah, it’s okay to have different tax situations. I started a business one year and got a pretty big refund. But we’re not out there bragging about how we get big refunds every year like it’s some goal to aim for and accomplishment to be proud of if achieved. That’s the mentality people are criticizing.
lcnPylGDnU4H9OF 3y ago
It sounds like you’re not one of the people they met who use it like a piggy bank. From my perspective, they’re just describing the habits of people who are used to not having any money: gotta spend this windfall quick because money doesn’t last long. It’s irrational and ultimately harmful but it’s borne from the practice of spending all of your money every month on non-trivial things and still being required to increase debt in order to stay in your apartment, e.g., credit card spending.
- sfink 3y ago
  It's not necessarily irrational. For example, for some people if they ever have any extra money, someone else will immediately spend it for them. If the earner wants to make a larger purchase, perhaps something that will cost short term but pay off in the long term, they need some mechanism to save, outside of the regular controls that apply to daily life. You may think this situation is still irrational, that the other person is being irrational. But again, there are many life situations out there. Perhaps they have lived in situations where they had to fight for what they needed. Perhaps they lived with an earner who would spend their money on drugs if it wasn't taken away, and yet if the non-earner saved it up themselves, the earner would find it and spend it. The supposedly rational thing may depend on everyone around you to also be rational, and everyone around them, etc. And given that we are human, and humans are not fully rational...
loeg 3y ago
You can file a W-4 with exemptions and avoid overwithholding! This is a fixable problem.
- demondemidi 3y ago
  How do I use a w4 to fix the social security problem without incurring underpayment of state and federal? Exemptions apply to all the taxes, no?
  - loeg 3y ago
    https://www.irs.gov/forms-pubs/about-form-w-4 https://www.irs.gov/forms-pubs/about-form-w-4 Fill it out correctly and your employers will do the right thing.
    - dpkirchner 3y ago
      I think the W-4 only applies to federal income tax. There's no field that instructs employers how much to pay in FICA (their share and yours). At best you can reduce withholdings to account for the excess FICA payments.
      - loeg 3y ago
        It's all total tax burden. Dollars are fungible.
  - lupire 3y ago
    Not sure about state, but you don't pay Federal Income and FICA separately. They are just numbers that get added together. You just pay money, and the IRS splits it up after they collect. If you "overpay" Income by $1000 and "underpay" FICA by a $1000, you're done, no problem.
phonon 3y ago
FICA cap is per employer, not total. Is that what you're referring to?
- sgerenser 3y ago
  FICA cap is not per employer. Well, it is from a withholding perspective (only because it would be impractical to make employers monitor withholding outside their control), but once you do your taxes for that year, you’ll get everything you paid in over the cap refunded.
  - phonon 3y ago
    Right, but employers aren't allowed to coordinate to calculate whether the hit the cap together or not. They don't have that discretion. See https://www.ecfr.gov/current/title-26/part-31#p-31.3121(a)(1)-1(a)(3) https://www.ecfr.gov/current/title-26/part-31#p-31.3121(a)(1...

dcow 3y ago

By the interest free loan logic, you should have your employer withhold zero and then you put your taxes in a high yield savings account and pay them all as late as possible.

xur17 3y ago
The IRS already thought of this - they charge you interest on the money you owed them (with some exceptions, like waiving it the first year it happens, only charging you if you withheld less than last year, etc).
- MenhirMike 3y ago
  Yeah, it sucks that the IRS is such a buzz-kill here, with 4-5% HYSA's, it would be nice to just let all the taxes sit there and pay one lump sum in April.
  - xur17 3y ago
    I owed a decent chunk more one year due to investments I sold, and left the money in tbills since I knew I was withholding at least as much as the previous year.
- sgerenser 3y ago
  The interest rate is also much higher than you can earn on anything risk free (8% right now) plus there’s penalties on top.
- dcow 3y ago
  Not sure I understand. Taxes are due in April. You don’t get charged a year of interest on the amount you own when filing…
  - xur17 3y ago
    https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty https://www.irs.gov/payments/underpayment-of-estimated-tax-b...