IRS Withholding and Part-Year Method

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Anonymous User
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IRS Withholding and Part-Year Method

Postby Anonymous User » Mon Mar 05, 2012 6:01 pm

Anyone have success requesting firms use the Part-Year Method of Tax Withholding? If so, can you elaborate: was the firm resistant, how close were your withholdings to actual tax liability, etc.

Thanks!

http://www.irs.gov/pub/irs-pdf/p505.pdf (Page 10)
http://www.law.georgetown.edu/finaid/fo ... uccess.pdf (Pages 1+2)
--LinkRemoved-- (Page 9 + 10)

Anonymous User
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Re: IRS Withholding and Part-Year Method

Postby Anonymous User » Mon Mar 05, 2012 6:27 pm

Why not just increase your allowances? I claimed like 8. Publication 15 lays out the calculation.
Last edited by Anonymous User on Mon Mar 05, 2012 7:17 pm, edited 1 time in total.

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Wellsfargowagon
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Re: IRS Withholding and Part-Year Method

Postby Wellsfargowagon » Mon Mar 05, 2012 6:50 pm

Anonymous User wrote:Why not just increase your exemptions? I claimed like 8. Publication 15 lays out the calculation.


By "exemptions," I think you mean "allowances." Exemptions are determined primarily by how many dependents you have. Allowances enable you to adjust the amount of income tax withheld; the more allowances are claimed, the less tax is withheld from each paycheck.

Inputting your info into this handy calculator on the IRS website should show you how many allowances to claim in order to avoid having too much tax withheld:

http://www.irs.gov/individuals/article/ ... 96,00.html

NotMyRealName09
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Re: IRS Withholding and Part-Year Method

Postby NotMyRealName09 » Mon Mar 05, 2012 7:59 pm

So, you're an SA trying to figure out your withholdings, right?

And the IRS withholding calculator won't work properly because of its unstated assumption that the info you input will continue for the entire year, when in fact as of the end of the summer through the end of the year, you won't be making any income, and the IRS withholding calculator advice will result in over withholding?

No, your firm won't give a shit about making your life easier using the partial year method, and you don't want to be the jackass who bugs HR for special treatment.

Well then, IRS pub 15 has all the answers you need! Now, I'm not going to explain it, because that would be hard for me and easy for you, but you CAN calculate your estimated year-end tax liability, then calculate the perfect number of allowances to claim to ensure your withholdings equal your tax burden, making your refund minimal. (hint - IRS Pub 15 is written for employers, so pretend you are your employer trying to figure out how much money you have to send to uncle Sam based on the allowances your employee listed. Your claimed allowances act to reduce the amount of taxable income, which in turn governs how much taxes you need to withhold.)

Each allowance is worth a certain amount depending on how often you are paid (look it up in Pub 15, it's like $150 per pay period for semi-monthly payroll). You take that value times the number of allowances you claim, subtract that from your gross income per pay period, reference the appropriate table, and that tells you how much your employer will withhold from your paycheck per pay period. Multiply that by the number of paychecks you will receive, and compare that number to what you've already calculated your total year-end federal tax burden will be. If its too high or low, adjust your withholdings accordingly.

Short answer - JUST CLAIM 9 ALLOWANCES. If you are making $2000+ per week, this will minimize your refund (maximizing the size of your paycheck) while avoiding the fact that if you claim 10 or more allowances, your employer has to expressly inform the IRS of that fact - and no one wants the IRS expressly informed of any fact involving their name unless it's absolutely necessary.

P.S. indiscriminate googling will turn up bad advice that claiming more allowances than you calculate using the W2 tables will lead to trouble. What all such advice ignores is the reality of the SA - a person who will make mad bank for only 12 or les weeks, and who will otherwise appear to the IRS to be an unemployed student, which you are. The W2 proceeds by assuming that a person who begins working will keep working for the rest of the year - but an SA won't, so those calculations will result in you withholding as if you were several tax brackets above where you are as just an SA and full-time student.

P.S.S. - do it at your own risk. The IRS won't accept the excuse that notmyrealname09 told you it was ok. But, I claimed 9 allowances during my SA, and my paycheck was like $500-600 more, and I STILL got a $1,500 refund.......
Last edited by NotMyRealName09 on Mon Mar 05, 2012 8:06 pm, edited 1 time in total.

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TatteredDignity
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Re: IRS Withholding and Part-Year Method

Postby TatteredDignity » Mon Mar 05, 2012 8:06 pm

How does that advice change if I have a spouse who is working the whole year? Can I still use the tables to figure out how many allowances to take based on our estimated year-end tax liability, or does that additional factor just screw everything up?

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Re: IRS Withholding and Part-Year Method

Postby NotMyRealName09 » Mon Mar 05, 2012 8:08 pm

TatteredDignity wrote:How does that advice change if I have a spouse who is working the whole year? Can I still use the tables to figure out how many allowances to take based on our estimated year-end tax liability, or does that additional factor just screw everything up?


Done right, the tables will get you the exact figure to withhold for any tax situation, such that your refund or your payment will be very close to zero. It's not exactly a simple thing, but if you're moderately smart and trust your intelligence, you can figure it out.

First, add both you and your spouse's expected gross income for the year (ex: your SA gross income plus her job's annual income). Next, calculate what your joint filing federal tax burden will be. Then, to make things easy, look at your spouse's pay stub and extrapolate - how much federal tax will your spouse withhold by Dec. 31? Take that number, subtract from what you previously calculated your joint federal tax burden would be, and that equals how much in total you need to have withheld from your SA income in total to meet you tax burden.

Now you know how much in total needs to be withheld for your summer job. Now use Pub 15 and play with the calculations to figure how many allowances you need to take in order to withhold the proper amount.

So, I'm making this all up, but here is a formula:

Your SA income + spouse's annual income = total annual income

Calculate federal taxes that a married couple will pay on your "total annual income. (figure it out) = total fed tax burden

Take spouse's last pay stub, look at amount in fed taxes withheld so far. Take that number, and add it to what you get by multiplying how much your spouse has withheld in fed taxes from each paycheck times the number of pay periods left in the year. That equals "amount of fed taxes withheld by spouse."

Total fed tax burden - amount of fed taxes withheld by spouse = amount of fed taxes you will owe from SA

Now, play with Pub 15 charts and whatnot (I'm not helping you) to figure out how many allowances you would have to take so that the amount you withhold in total from your SA paychecks equals "amount of fed taxes you will owe from SA"

It works, but you have to think it through.

Just note - if you fill out the W2 calcs based on your SA salary, it assumes you will be working at that wage all year, which you won't, and which results in you sevearly over withholding. So you have to compensate, or else you will over withhold and get a $5000 tax refund - $5000 you could have spent on models and bottles during your SA'ship, but didn't, because you were too stupid to figure out your taxes.
Last edited by NotMyRealName09 on Mon Mar 05, 2012 10:19 pm, edited 2 times in total.

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TatteredDignity
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Re: IRS Withholding and Part-Year Method

Postby TatteredDignity » Mon Mar 05, 2012 8:21 pm

NotMyRealName09 wrote:
TatteredDignity wrote:How does that advice change if I have a spouse who is working the whole year? Can I still use the tables to figure out how many allowances to take based on our estimated year-end tax liability, or does that additional factor just screw everything up?


Done right, the tables will get you the exact figure to withhold for any tax situation, such that your refund or your payment will be very close to zero. It's not exactly a simple thing, but if you're moderately smart and trust your intelligence, you can figure it out.


Thanks!

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Re: IRS Withholding and Part-Year Method

Postby Anonymous User » Mon Mar 05, 2012 9:17 pm

NotMyRealName09 wrote:So, you're an SA trying to figure out your withholdings, right?

And the IRS withholding calculator won't work properly because of its unstated assumption that the info you input will continue for the entire year, when in fact as of the end of the summer through the end of the year, you won't be making any income, and the IRS withholding calculator advice will result in over withholding?

No, your firm won't give a shit about making your life easier using the partial year method, and you don't want to be the jackass who bugs HR for special treatment.

Well then, IRS pub 15 has all the answers you need! Now, I'm not going to explain it, because that would be hard for me and easy for you, but you CAN calculate your estimated year-end tax liability, then calculate the perfect number of allowances to claim to ensure your withholdings equal your tax burden, making your refund minimal. (hint - IRS Pub 15 is written for employers, so pretend you are your employer trying to figure out how much money you have to send to uncle Sam based on the allowances your employee listed. Your claimed allowances act to reduce the amount of taxable income, which in turn governs how much taxes you need to withhold.)

Each allowance is worth a certain amount depending on how often you are paid (look it up in Pub 15, it's like $150 per pay period for semi-monthly payroll). You take that value times the number of allowances you claim, subtract that from your gross income per pay period, reference the appropriate table, and that tells you how much your employer will withhold from your paycheck per pay period. Multiply that by the number of paychecks you will receive, and compare that number to what you've already calculated your total year-end federal tax burden will be. If its too high or low, adjust your withholdings accordingly.

Short answer - JUST CLAIM 9 ALLOWANCES. If you are making $2000+ per week, this will minimize your refund (maximizing the size of your paycheck) while avoiding the fact that if you claim 10 or more allowances, your employer has to expressly inform the IRS of that fact - and no one wants the IRS expressly informed of any fact involving their name unless it's absolutely necessary.

P.S. indiscriminate googling will turn up bad advice that claiming more allowances than you calculate using the W2 tables will lead to trouble. What all such advice ignores is the reality of the SA - a person who will make mad bank for only 12 or les weeks, and who will otherwise appear to the IRS to be an unemployed student, which you are. The W2 proceeds by assuming that a person who begins working will keep working for the rest of the year - but an SA won't, so those calculations will result in you withholding as if you were several tax brackets above where you are as just an SA and full-time student.

P.S.S. - do it at your own risk. The IRS won't accept the excuse that notmyrealname09 told you it was ok. But, I claimed 9 allowances during my SA, and my paycheck was like $500-600 more, and I STILL got a $1,500 refund.......
For anyone interested in the math:

step 1: calculate your actual owed federal income tax. Total Summer Pay - Personal Exemption (3800) - Standard Deduction (5950). You owe 10% of the first 8700, and 15% of anything above 8700 up to 35350.
step 2: calculate the amount of tax that should be withheld per paycheck. Natch, this is the figure from step 1 divided by the number of paychecks. For simplicity, let's assume your firm pays biweekly.
step 3: solve the following formula: (Biweekly Salary - 146.15x - 1442)*.25+187.15 = the figure from step 2 above. x = the proper # of allowances.

Example for someone doing a 10 week SA with $3100/week pay:

step 1: 3100 * 10 = 31000 - 3800 - 5950 = 21250 - 8700 = 12550 * .15 = 1882.5 + 870 = 2752.5 tax owed
step 2: 2752.5 / 5 = 550.5 should be withheld each paycheck
step 3:
(6200-146.15x-1442)*.25+187.15 = 550.5
1550 - 36.54x - 360.5 + 187.15 = 550.5
x = 22.61, so your allowances should be 22 so as not to underwithhold

I had not heard that >10 allowances gets a flag from the IRS, but if that's true you'd probably want to stay under 10.

THIS IS NOT LEGAL OR TAX ADVICE. THIS IS A MATH EXERCISE. FIND AN ACCOUNTANT/LAWYER.

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Re: IRS Withholding and Part-Year Method

Postby 03121202698008 » Mon Mar 05, 2012 9:48 pm

NotMyRealName09 wrote:So, you're an SA trying to figure out your withholdings, right?

And the IRS withholding calculator won't work properly because of its unstated assumption that the info you input will continue for the entire year, when in fact as of the end of the summer through the end of the year, you won't be making any income, and the IRS withholding calculator advice will result in over withholding?

No, your firm won't give a shit about making your life easier using the partial year method, and you don't want to be the jackass who bugs HR for special treatment.

Well then, IRS pub 15 has all the answers you need! Now, I'm not going to explain it, because that would be hard for me and easy for you, but you CAN calculate your estimated year-end tax liability, then calculate the perfect number of allowances to claim to ensure your withholdings equal your tax burden, making your refund minimal. (hint - IRS Pub 15 is written for employers, so pretend you are your employer trying to figure out how much money you have to send to uncle Sam based on the allowances your employee listed. Your claimed allowances act to reduce the amount of taxable income, which in turn governs how much taxes you need to withhold.)

Each allowance is worth a certain amount depending on how often you are paid (look it up in Pub 15, it's like $150 per pay period for semi-monthly payroll). You take that value times the number of allowances you claim, subtract that from your gross income per pay period, reference the appropriate table, and that tells you how much your employer will withhold from your paycheck per pay period. Multiply that by the number of paychecks you will receive, and compare that number to what you've already calculated your total year-end federal tax burden will be. If its too high or low, adjust your withholdings accordingly.

Short answer - JUST CLAIM 9 ALLOWANCES. If you are making $2000+ per week, this will minimize your refund (maximizing the size of your paycheck) while avoiding the fact that if you claim 10 or more allowances, your employer has to expressly inform the IRS of that fact - and no one wants the IRS expressly informed of any fact involving their name unless it's absolutely necessary.

P.S. indiscriminate googling will turn up bad advice that claiming more allowances than you calculate using the W2 tables will lead to trouble. What all such advice ignores is the reality of the SA - a person who will make mad bank for only 12 or les weeks, and who will otherwise appear to the IRS to be an unemployed student, which you are. The W2 proceeds by assuming that a person who begins working will keep working for the rest of the year - but an SA won't, so those calculations will result in you withholding as if you were several tax brackets above where you are as just an SA and full-time student.

P.S.S. - do it at your own risk. The IRS won't accept the excuse that notmyrealname09 told you it was ok. But, I claimed 9 allowances during my SA, and my paycheck was like $500-600 more, and I STILL got a $1,500 refund.......


You can use the calculator. Just put in as your starting X weeks before the end of the year.

It comes to $2,719 in tax and says 31 allowances for single with a personal exemption and standard deduction.

If you do a start and end date, it says 35 allowances. Weird.

But, I'd go with 9
Last edited by 03121202698008 on Mon Mar 05, 2012 9:56 pm, edited 2 times in total.

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Re: IRS Withholding and Part-Year Method

Postby wiseowl » Mon Mar 05, 2012 9:53 pm

I asked my firm's HR what the max number of allowances I could take was, they said 9 was the highest without raising eyebrows, and that's what I did. Taxes came out fine, got fed refund and owed some state.

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Re: IRS Withholding and Part-Year Method

Postby NotMyRealName09 » Mon Mar 05, 2012 10:27 pm

wiseowl wrote:I asked my firm's HR what the max number of allowances I could take was, they said 9 was the highest without raising eyebrows, and that's what I did. Taxes came out fine, got fed refund and owed some state.


Yes, others have the hard math laid out far better than I, but the answer invariably will be some number of allowances more than 9, and more than 9 means your employer tells the IRS you are withholding more than 9, which means someone who knows tax better than you will look all over you business, and IRS people have no sense of humor and carry guns as part of their job (yes, IRS agents have guns, isn't that weird?). So 9 allowances will increase your take home pay but still give you a safety buffer before the IRS is obligated to take a closer look.

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Re: IRS Withholding and Part-Year Method

Postby 03121202698008 » Mon Mar 05, 2012 10:33 pm

NotMyRealName09 wrote:
wiseowl wrote:I asked my firm's HR what the max number of allowances I could take was, they said 9 was the highest without raising eyebrows, and that's what I did. Taxes came out fine, got fed refund and owed some state.


Yes, others have the hard math laid out far better than I, but the answer invariably will be some number of allowances more than 9, and more than 9 means your employer tells the IRS you are withholding more than 9, which means someone who knows tax better than you will look all over you business, and IRS people have no sense of humor and carry guns as part of their job (yes, IRS agents have guns, isn't that weird?). So 9 allowances will increase your take home pay but still give you a safety buffer before the IRS is obligated to take a closer look.


IRS agents don't have guns. Only their 1811 officers do...who are really investigators not agents. They aren't doing regular audits. http://blog.al.com/businessnews/2010/10/some_irs_agents_carry_guns_too.html

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Re: IRS Withholding and Part-Year Method

Postby NotMyRealName09 » Mon Mar 05, 2012 11:23 pm

Well, if we're picking nits, at least IRS Criminal Investigative Special Agents are given weapons, and I don't want them looking at me unless I deserve it - and even then, I probably don't want themlooking at me.

http://www.irs.gov/irm/part9/irm_09-001-004.html#d0e199

9.1.4.6  (05-30-2008)
Directive No. 4 - Firearms

The nature of CI's activities requires the ability to respond in a safe and timely manner 24 hours a day. Special agents are not expected to be armed at all times, but must have access to their assigned firearm when required to perform official duties.

Special agents are authorized, but are not required, to carry their IRS-issued weapon when off-duty. When carrying their IRS-issued weapon off-duty, special agents are subject to all IRM provisions concerning firearms.

Criminal Investigation will provide each special agent with a firearms safe in the office and a safety container for home storage.

The Chief, CI, will ensure that each special agent has met the requirements to carry firearms. Futhermore, the Director, Field Operations and each SAC will ensure that each special agent in his/her office has met the requirements to carry firearms.

The SAC may authorize special agents to carry IRS-owned weapons other than the agents' assigned firearm (for example, shotguns). The SAC will notify the Director, Field Operations of such authorization within 24 hours.

Special agents who carry a privately-owned weapon during off-duty hours are subject to the same civil and criminal restrictions as a private citizen. Special agents may not use their position or credentials to qualify under state or local laws to purchase, license, carry, or use private weapons; however upon request, credentials may be displayed as occupational identification, but not to influence the decision.

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Re: IRS Withholding and Part-Year Method

Postby Anonymous User » Mon Mar 05, 2012 11:25 pm

NotMyRealName09 wrote:
wiseowl wrote:I asked my firm's HR what the max number of allowances I could take was, they said 9 was the highest without raising eyebrows, and that's what I did. Taxes came out fine, got fed refund and owed some state.


Yes, others have the hard math laid out far better than I, but the answer invariably will be some number of allowances more than 9, and more than 9 means your employer tells the IRS you are withholding more than 9, which means someone who knows tax better than you will look all over you business, and IRS people have no sense of humor and carry guns as part of their job (yes, IRS agents have guns, isn't that weird?). So 9 allowances will increase your take home pay but still give you a safety buffer before the IRS is obligated to take a closer look.

Actually, this doesn't appear to be true: http://www.irs.gov/individuals/article/ ... 12,00.html
Again, this is not legal advice

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Re: IRS Withholding and Part-Year Method

Postby NotMyRealName09 » Mon Mar 05, 2012 11:30 pm

Anonymous User wrote:
NotMyRealName09 wrote:
wiseowl wrote:I asked my firm's HR what the max number of allowances I could take was, they said 9 was the highest without raising eyebrows, and that's what I did. Taxes came out fine, got fed refund and owed some state.


Yes, others have the hard math laid out far better than I, but the answer invariably will be some number of allowances more than 9, and more than 9 means your employer tells the IRS you are withholding more than 9, which means someone who knows tax better than you will look all over you business, and IRS people have no sense of humor and carry guns as part of their job (yes, IRS agents have guns, isn't that weird?). So 9 allowances will increase your take home pay but still give you a safety buffer before the IRS is obligated to take a closer look.

Actually, this doesn't appear to be true: http://www.irs.gov/individuals/article/ ... 12,00.html
Again, this is not legal advice


Ah, I stand corrected. That was how it was last I checked, summer of 2009. See what I get for trying to help? If you said upstaged by a more correct person, you would win were it a competition.

Well, then screw it, right? Claim the allowances to which you are entitled.

Note that the IRS no longer specifies how many allowances will trigger attention. Those sneaky bastards.....

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Re: IRS Withholding and Part-Year Method

Postby 03121202698008 » Tue Mar 06, 2012 9:36 am

NotMyRealName09 wrote:Well, if we're picking nits, at least IRS Criminal Investigative Special Agents are given weapons, and I don't want them looking at me unless I deserve it - and even then, I probably don't want themlooking at me.

http://www.irs.gov/irm/part9/irm_09-001-004.html#d0e199

9.1.4.6  (05-30-2008)
Directive No. 4 - Firearms

The nature of CI's activities requires the ability to respond in a safe and timely manner 24 hours a day. Special agents are not expected to be armed at all times, but must have access to their assigned firearm when required to perform official duties.

Special agents are authorized, but are not required, to carry their IRS-issued weapon when off-duty. When carrying their IRS-issued weapon off-duty, special agents are subject to all IRM provisions concerning firearms.

Criminal Investigation will provide each special agent with a firearms safe in the office and a safety container for home storage.

The Chief, CI, will ensure that each special agent has met the requirements to carry firearms. Futhermore, the Director, Field Operations and each SAC will ensure that each special agent in his/her office has met the requirements to carry firearms.

The SAC may authorize special agents to carry IRS-owned weapons other than the agents' assigned firearm (for example, shotguns). The SAC will notify the Director, Field Operations of such authorization within 24 hours.

Special agents who carry a privately-owned weapon during off-duty hours are subject to the same civil and criminal restrictions as a private citizen. Special agents may not use their position or credentials to qualify under state or local laws to purchase, license, carry, or use private weapons; however upon request, credentials may be displayed as occupational identification, but not to influence the decision.


I linked to these. They are 1811 agents not revenue agents. They are federal agents like the FBI or ATF. They don't do audits. 1811 agents are law enforcement. Revenue agents are accountants.

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Re: IRS Withholding and Part-Year Method

Postby Anonymous User » Tue Mar 06, 2012 10:40 am

NotMyRealName09 wrote:No, your firm won't give a shit about making your life easier using the partial year method, and you don't want to be the jackass who bugs HR for special treatment.

My firm sent us a "fill this out to get on the partial year withholding method" form with the rest of our paperwork. Didn't even realize it was odd of them to do that.




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