How to minimize taxes withheld during final 2 paychecks

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absolute zero
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Joined: Thu Dec 29, 2016 3:59 pm

How to minimize taxes withheld during final 2 paychecks

Post by absolute zero »

I had a couple life events occur recently (marriage, baby) and failed to adjust my W-4 earlier in the year. Now, after doing some back of the envelope math, it looks like I could be facing a $5k tax refund. Is there any way to adjust my W-4 in order to drop my withholding taxes to as close to zero as possible?

I read that there is a way to mark “exempt” on a W-4 but apparently I don’t “qualify.” I read that to qualify you must have paid no income taxes in the previous year, and not expect to pay income taxes for the current year.

Any tips from the Boglehead community? I only have a couple paychecks left, so I won’t be making a huge difference here, but if it’s possible to reduce my refund from $5k to $4k by making some last minute W-4 tweaks then id like to do so, as I can make use of the cash in the near term. Thanks.
tibbitts
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Re: How to minimize taxes withheld during final 2 paychecks

Post by tibbitts »

Before you're bombarded with comments that you're crazy for not buying $5k in I-bonds with your refund... I think this is something that is way below the threshold of being worth thinking, much less doing anything, about ... unless maybe you have some unforeseen emergency need for the cash? There's "can make use of the cash", which most of us can do most of the time, and then an actual urgent need for it.
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absolute zero
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Re: How to minimize taxes withheld during final 2 paychecks

Post by absolute zero »

tibbitts wrote: Fri Nov 26, 2021 11:21 am Before you're bombarded with comments that you're crazy for not buying $5k in I-bonds with your refund... I think this is something that is way below the threshold of being worth thinking
Funny you mention…I am considering purchasing $20k of I bonds in December and another $20k in January. I can swing this, but things will be kind of cash-tight over the next 3-4 months if I do so. So I’m looking to avoid loaning the IRS any more money than I already have, so that my spouse doesn’t complain that we have a virtually empty checking account for a couple months.

In this case, even $1k extra cash helps, especially if it (potentially) just takes a few clicks on my computer to adjust my W-4 to make this happen.
Mike Scott
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Re: How to minimize taxes withheld during final 2 paychecks

Post by Mike Scott »

If you really need the cash ASAP, you can adjust on line 4b of the W4 form. Don't forget to turn in another new W4 for next year.
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Eagle33
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Re: How to minimize taxes withheld during final 2 paychecks

Post by Eagle33 »

absolute zero wrote: Fri Nov 26, 2021 11:41 am
tibbitts wrote: Fri Nov 26, 2021 11:21 am Before you're bombarded with comments that you're crazy for not buying $5k in I-bonds with your refund... I think this is something that is way below the threshold of being worth thinking
Funny you mention…I am considering purchasing $20k of I bonds in December and another $20k in January. I can swing this, but things will be kind of cash-tight over the next 3-4 months if I do so. So I’m looking to avoid loaning the IRS any more money than I already have, so that my spouse doesn’t complain that we have a virtually empty checking account for a couple months.

In this case, even $1k extra cash helps, especially if it (potentially) just takes a few clicks on my computer to adjust my W-4 to make this happen.
You can delay your January I-bond purchase until April and still get the same bond terms as in January.
babystep
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Re: How to minimize taxes withheld during final 2 paychecks

Post by babystep »

absolute zero wrote: Fri Nov 26, 2021 11:14 am I had a couple life events occur recently (marriage, baby) and failed to adjust my W-4 earlier in the year. Now, after doing some back of the envelope math, it looks like I could be facing a $5k tax refund. Is there any way to adjust my W-4 in order to drop my withholding taxes to as close to zero as possible?
Matches with your screen name :happy

Can't you update the W4 and add a dependent and/or status as married and that should help some?
Perhaps call HR with the same?
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Monster99
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Re: How to minimize taxes withheld during final 2 paychecks

Post by Monster99 »

May depend on the date you are paid - if you are paid on the 1st of the month, probably too late to change the W4 for Dec.
Payroll will need a few weeks for processing. At my Megacorp, it was the 14th of the previous month before payroll changes took effect.....
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