After tax pay for summer associates

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bigben
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Re: After tax pay for summer associates

Postby bigben » Mon Feb 28, 2011 8:24 pm

NotMyRealName09 wrote:
bigben wrote:
The problem is they tax you at rate based on 160K/year income instead of the 20-40 you will likely make for the year as an SA.

lol no they don't

...

Oh, you mean that they withhold as if you made that much all year. Not tax you.

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PKSebben
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Re: After tax pay for summer associates

Postby PKSebben » Mon Feb 28, 2011 11:07 pm

bigben wrote:
NotMyRealName09 wrote:
bigben wrote:
The problem is they tax you at rate based on 160K/year income instead of the 20-40 you will likely make for the year as an SA.

lol no they don't

...

Oh, you mean that they withhold as if you made that much all year. Not tax you.


I love semantics!

bigben
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Re: After tax pay for summer associates

Postby bigben » Mon Feb 28, 2011 11:10 pm

PKSebben wrote:I love semantics!

At first it really sounded like the guy meant tax.

Manash
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Re: After tax pay for summer associates

Postby Manash » Thu Apr 05, 2012 12:57 am

Thanks NotMyRealName09.

Ofta3184
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Re: After tax pay for summer associates

Postby Ofta3184 » Fri Jun 22, 2012 11:57 pm

NotMyRealName09 wrote:
bigben wrote:lol no they don't


If you fill out your W-4 on your first day of work as a summer and you follow the form's instructions, that is exactly what will happen. The form will tell you to put down a certain number of allowances, but the W-4 assumes you will be working for the rest of the year. You won't, though.

Here is an example of how to adjust your Summer Associate W-4 withholdings to minimize your federal refund and get more $$$ in each paycheck.

Assume you're single, and the summer associate job is the only job you will work all year. You have no kids, and get paid semi-monthly. Also assume you get paid $2000 / wk, and will be working 12 weeks.

You will gross $24,000 that summer. Lets say you will owe about $1760 in federal taxes, figured using a free online 2010 tax calculator - make sure you do this calculation correctly for 2011. (Gross income - Standard Deduction - Exemptions = Adjusted Gross Income. AGI x Tax Bracket = Federal Taxes owed).

If you run through the W-4 form, http://www.google.com/url?sa=t&source=w ... MDWjFVFBMQ , the form ends up telling you - a single person with no kids and no other jobs - to put down 2 allowances. But as will be shown, 2 allowances leads to massive overwithholding of your cash.

First, what is an allowance? An allowance is a set dollar figure used to reduce your gross income before calculating your withholding. See IRS Pub-15, page 35, table 5 at http://www.google.com/url?sa=t&source=w ... 3y9EIhYUcQ .

So in our example, 1 allowance equals $154.17.

THE MATH

Take your semimonthly gross wages, which for ease we'll say is $4000. Subtract the 2 allowances from that amount. $4000 - 154.17 - 154.17 = $3691.66. Now take that number and go to the tables in IRS Pub-15 to calculate your withholding.

In IRS Pub-15, on page 36 is TABLE 3 - the percentage method tables for semimonthly payroll periods for single people. Pluging $3691.66 into that table, you do this:

Since $3691.66 is greater than $3,571 but not over $7,354, the amount withheld will be $709.35 plus 28% of the excess over $3,571.

Soooo, $3691.66 - 3,571 = $120.66. Multiply by .28 to get $33.79 - this is the "28% of the excess."

Add the "excess" of $33.79 to $709.35, and we get $743.14. This is how much will be withheld from each paycheck with 2 allowances.

If you followed the form W-4 instructions and took only 2 allowances, over the summer the feds will withhold $4458.84 ($743.14 x 6 paychecks). BUT YOU ONLY WILL OWE $1760 or so come tax time!!!!!!!!! That means you'll get a $2698.84 tax refund. Thats straight cash that could be spent on top-shelf liquor all summer long.

So what to do? Play with the numbers! Run the analysis but add more allowances.

Lets try taking 9 allowances (10 or more your employer has to inform the IRS - not a big deal, but I prefer the IRS not put their eye on me.)

9 allowances equals (9 x 154.17 = $1387.53). Subtract from gross wages to get $2612.47.

Goto IRS Pub-15 page 36 table 3. Since $2612.47 is over $1525 but not over $3571, the amount withheld will be $197.85 plus 25% of the excess over $1525.

(($2612.47 - $1525) x .25) + $197.85 = $469.72. That is the amount withheld from each paycheck with 9 allowances. Taking 9 allowances instead of 2 means $273 more per paycheck. Your federal refund will be $1058 instead of $2698.84. Thats money in your pocket.

In our little example, the proper number of allowances is something like 13 or so. Taking 15 leads to underwithholding.

Make sense? (I disclaim inadvertant math / spelling errors, but the procedure is correct.)

Consider it a fun math game that puts hundreds more dollars in each paycheck, which you can then blow on booze or shoes depending on your preferences. Discover Scotch and other fine whiskeys. They're wonderful.


So did claiming 9 allowances work out for everyone? Im thinking about changing my 2 allowances to 9

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Pete Venkman
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Re: After tax pay for summer associates

Postby Pete Venkman » Wed May 21, 2014 9:54 am

Trying to resurrect this thread. Are people going with 9 allowances as a safe number?

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BuckinghamB
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Re: After tax pay for summer associates

Postby BuckinghamB » Wed May 21, 2014 11:31 am

Just use the irs withholding calculator and ask your firm if the calculator's number of allowances is cool with them

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lonerider
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Re: After tax pay for summer associates

Postby lonerider » Wed May 21, 2014 10:29 pm

.

Anonymous User
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Re: After tax pay for summer associates

Postby Anonymous User » Sun May 25, 2014 9:29 pm

I've never had to use anything other than the standard 1 or 2 withholding allowances, but the IRS calculator says I should claim 24 for my SA. Stupid question, but where on the W-4 do I put the 24? Seems like Line 5 is the place. Can someone confirm?

boushi
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Re: After tax pay for summer associates

Postby boushi » Sun May 25, 2014 10:08 pm

I put 35 exemptions and I still ended up getting a ~$700 federal refund but I'm married so others' mileage may vary.

mr.hands
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Re: After tax pay for summer associates

Postby mr.hands » Sun May 25, 2014 10:21 pm

So if I mistakenly only took 1 or 2, will I still get it all back via refund?

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AllDangle
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Re: After tax pay for summer associates

Postby AllDangle » Sun May 25, 2014 10:50 pm

Tag

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Danger Zone
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Re: After tax pay for summer associates

Postby Danger Zone » Mon May 26, 2014 12:44 am

Anonymous User wrote:I've never had to use anything other than the standard 1 or 2 withholding allowances, but the IRS calculator says I should claim 24 for my SA. Stupid question, but where on the W-4 do I put the 24? Seems like Line 5 is the place. Can someone confirm?

Correct, line 5. You can skip the worksheet that it says you keep for your own records.

Mr hands, yes you'll get a big refund. But wouldn't you rather have it now?

Anonymous User
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Re: After tax pay for summer associates

Postby Anonymous User » Mon May 26, 2014 1:06 am

Danger Zone wrote:
Anonymous User wrote:I've never had to use anything other than the standard 1 or 2 withholding allowances, but the IRS calculator says I should claim 24 for my SA. Stupid question, but where on the W-4 do I put the 24? Seems like Line 5 is the place. Can someone confirm?

Correct, line 5. You can skip the worksheet that it says you keep for your own records.


Good man. Thanks, DZ!




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