Archive for December, 2008

Getting The Answer To Your W4 Questions Straight By Knowing What Payment Strategy You Should Use

December 19th, 2008 -- Posted in W4 Assistance | No Comments »

If you are thinking about how to make filling out tax return forms less painful, you should really begin by knowing precisely how you should pay off your tax liability in the first place. Everything begins with your tax payment strategy. Once you have decided how, answering W4 questions should be a lot easier. There are 2 ways in doing so. One: you pay enough just so to cover the bases until next tax filing deadline. Two: you pay more in order to avoid the penalty for underpaying your tax liability.

In the first strategy, you can declare a lesser amount (as compared to strategy #2) and you may just get away without facing any IRS penalties at all. However, the problem lies when you gain a substantial profit for the covered year. In which case, you will be faced with paying off a higher overdue balance; not to mention the possibility of paying for penalties as well in the event someone notices your “oversight.” You can remedy this though, by simply filing another W4 tax return when you do earn more than your projected earnings for the covered year.

The second strategy dispenses away with the need to file a second tax return form. You simply pay a little more from the very onset, taking into consideration the possible earnings you will have from your savings account, or account from any money market source, or any proven stable investment schemes you may have. You do not have to include your possible earnings from speculative investments as these cannot be substantiated until they do materialize.

Finding Strategies That Work When It Comes To Answering W4 Questions

December 18th, 2008 -- Posted in W4 tax Form | 1 Comment »

Naturally enough, when it comes to filling out tax return forms, people would always want to find the best strategies to answer the questions quickly and painlessly. This is the same case when it comes to answering 1040 or W4 questions. However, simply ticking off boxes or randomly assigning 0 and 1 is not the way to best declare your financial liability.

There are two main strategies you can use if you want to determine how much tax liability you should declare for the incoming working year.

One: you make a detailed list of all your ongoing money making ventures. This can include current investments, ongoing home based business, possible earnings from saving accounts, and of course your current wages. Now comes the tricky part. You need to make a projection on how much you think you will be earning from these in the coming months. From there, you can base your tax liability. However, this strategy is full of pitfalls. For one thing, no one can accurately predict how much money can be earned from any form of investments – even if these seem to be quite stable. Even the most conservative or generous estimations can leave you paying too little or too much withholding tax. And these may still earn you penalties in the end.

Two: you could simply choose to pay 100% or 110% of the tax liability amount your paid from last year’s W4 or 1040 form. If you had an annual income last year of under $150,000, and you are not expecting any changes in financial, civil or legal status for this year, it would be safe to declare 100% tax liability. However, paying an additional 10% more will give you the leeway for avoiding future penalties should some unexpected changes happen for the incoming year.

Fielding W4 Questions: What Is The Easiest Way Of Getting The Amount For Tax Liability?

December 17th, 2008 -- Posted in W4 Assistance | No Comments »

W4 is a tax return form that basically declares how much tax should be withheld by your employer from your paycheck for the next year. Although this has some similarities with tax return form 1040, there are several differences between the two. For one thing, the amount you may be declaring for W4 may not correspond with the one you have for 1040. In theory, these declarations should be of the same amount. However, it seldom works that way.

One of the most important W4 questions is how much exactly tax should an employee pay. The easiest possible answer to this is to simply declare a payable amount of 110% from the previous year’s total tax liability. This is of course, assuming that you are still earning the same or slightly higher wage amount. If it is not your wont to compute your tax projection from scratch, simply take a copy of your accomplished 1040 tax return form from last year and look at line 56. Here, you will see the amount you have declared after “Total Tax.” Simply take that amount, compute for 10% and add that 10% to the Total Tax amount.

Example: last year’s declared amount is $10,000. 10% of that would be $1,000. Then this year’s tax liability should amount to $11,000.

In some cases, you may only be liable to pay 100% of last year’s tax, so paying for 110% may seem extreme. This is particularly true if your earning capability from last year was under the $150,000 mark; which means that you should only be paying for $10,000 (if we take the abovementioned example as basis.) However, paying for 10% more for this year’s tax liability projection will provide you the financial safety net in case something unexpected turns up.

Expedient Measures In Answering W4 Questions

December 16th, 2008 -- Posted in W4 Assistance | No Comments »

The W4 form is basically a way of gauging how much federal income tax should be deducted (withheld) from your paycheck within one working year. This form is very different from Form 1040 or the Income Tax Return form, although most information can be seen in both forms. In case you want to take less complicated measures in answering the W4 questions, here are some tips on how to do so.

1.  Download the *.pdf form from the IRS website or any reputable online page. Some companies provide their employees a virtual copy of the W4 for easier access.
2.  Fill out all pertinent personal information like name, Social Security Number, address and civil status. This will be a lot easier if you have all the information right there with you. Also, try to simplify matters considerably. For example, if you are living with someone but not really legally married, then simply tick off the ‘single’ box. Fussing over minor details will only make your work harder for you.
3.  Calculating your withholding tax allowances may be as simple as checking your personal exemptions on your 1040. However, should you decide to deviate from the details of your income tax return, then try to use the IRS Withholding Calculator (http://www.irs.gov/individuals/article/0,,id=96196,00.html) for easier computation. You can also use the tables on the back of the W4 form.
4.  Go over your forms several times to ensure that the entries are correct before signing it and affixing the date.
5.  You need to submit the W4 form on the deadline your employer has set – and not the nationally set deadline. Your employer also needs to fill part of the W4 and submit this along with the W4 papers of the other employees.

W4 Questions: How Would I Know If I Am Exempted?

December 15th, 2008 -- Posted in W4 Tax Information | No Comments »

One of the most prevalent W4 questions is whether or not a person can claim exemption from withholding taxes. One general misconception is that only unemployed people are exempted from these taxes; but that is not necessarily so. Another misconception is that once you are declared exempted from withholding taxes, you skip filing W4 forms altogether. Again, that is not the legal way of doing so.

First of all, you can be working and be exempted from withholding taxes at the same time. If you did not declare any federal tax liability from the previous year; and you do not particularly think that you can do so for the incoming one, then yes, you may declare yourself exempted. Also, as stated in the Personal Allowances Worksheet, you (and your spouse, if you have one) can be exempted if your total annual income is less than $850; and that you do not particularly expect to receive more than $300 from unearned income such as investments in dividends and stocks.

On the other hand, if a person declares you as a dependent on his or her tax return, then you cannot file for exemption anymore. At the same time, you also cannot claim tax allowance on Question A of the Personal Allowances Worksheet.

Submitting a W4 is still essential if you are legally declared as exempted from withholding taxes. For legal purposes, you still need to submit the Employee’s Withholding Allowance Certificate with filled lines for 1-4, 7, the signatory box and the date box.