Summer Associate Tax Withholding Forum

[sgsmith]

What's the move here? Do folks just have the full amount withheld as though they were working for the full year and get a giant refund the next year? Or is that stupid? Bonus points if anyone can tell me whether getting married after the summer associateship but before filing taxes next spring changes the calculus at all.

[Anonymous User]

You can do whatever you like, an SA position is no different than any other type of short-term employment. Being married doesn't have to change anything, since you can just adjust the allowances on your W-4. I'm not sure why anyone would normally opt to have extra tax withheld though.

[TooOld4This]

Some firms will have a form you can fill out so that your withholding is calculated on a partial year of income. Otherwise you can max out the exemptions on your W4 to shrink the refund. (Figure out the right number using the IRS withholding calculator online, not the W4 worksheet.)

Your filing status is applicable for the full year, not part of it.

As for whether it is better to get the refund or not: if getting the cash upfront reduces your loans (or let's you pay down loans), work to minimize the refund. If the only thing you are giving up is nominal interest in the bank, do whatever you want.

[arklaw13]

Also interested in this. So if I'm married and want as little taxes withheld as HR will allow, how would I do this? As in number of exemptions?

[SemperLegal]

Also interested in this. So if I'm married and want as little taxes withheld as HR will allow, how would I do this? As in number of exemptions?

IRS has a Withholding Calculator. Then when you fill out your W4 on the first day, instead of using the worksheet and having like 3 allowances, use the number that the calc gives (30-40). Make sure you use the calculator, and input the correct info. If your end of the year tax owed is to high, there are penalties from the IRS.

[hous]

Are there any tax incentives for paying student loans off sooner? For instance, if you make 60k and attribute 20k to your student loans in year 1, are you still taxed on the full 60k? I realize this is an incredibly stupid question, but I can envision why such an incentive would be beneficial.

[SemperLegal]

Are there any tax incentives for paying student loans off sooner? For instance, if you make 60k and attribute 20k to your student loans in year 1, are you still taxed on the full 60k? I realize this is an incredibly stupid question, but I can envision why such an incentive would be beneficial.

You can deduct a shockingly low amount of student debt interest. However, there is a max AGI where the deduction is phased out. Biglaw salaries exceed this level, so the only time to take it, I think, would be during your SA.

No idea if it makes economic sense, or if its still allowed.

[nomdeplumeify]

Are there any tax incentives for paying student loans off sooner? For instance, if you make 60k and attribute 20k to your student loans in year 1, are you still taxed on the full 60k? I realize this is an incredibly stupid question, but I can envision why such an incentive would be beneficial.

The max you can deduct is $2,500 and it only reduces your adjusted gross income. And like the poster above me said, there is a phase-out amount so there really isn't much of an incentive tax wise.

[bdubs]

What's the move here? Do folks just have the full amount withheld as though they were working for the full year and get a giant refund the next year? Or is that stupid? Bonus points if anyone can tell me whether getting married after the summer associateship but before filing taxes next spring changes the calculus at all.

If you get married within the calendar year of your SA you will get the tax benefit (burden) of being married and will have to file jointly with your spouse.

The smart move is probably to figure out your withholdings and adjust your w4 accordingly at the beginning of the summer. I had a relatively complicated tax situation and the IRS withholding calculator worked just fine for me, so it should work well for most people. The only reason I would recommend the giant refund method is if you have bad financial management skills and will need the money to supplement/eliminate your bar advance/stipend.

[jbagelboy]

Just did my taxes a couple wks ago.. I think the cap is $90K for single, $180K for married. So if you get married and your spouse is still in school or doesn't make more than $10K (unlikely but possible), theoretically you could still get the interest payment & lifetime education or w/e credits your first full year of work?

Otherwise you could only get it for your SA's and your rump year after graduation.

[BVest]

If your end of the year tax owed is too high, there are penalties from the IRS.

Just to expand upon this, during the year 2014 you need to have withheld (or paid in estimated vouchers) an amount equal to the lesser of 90% of your tax due for 2014 or 100% of your tax due for 2013.

e.g. In 2013 you had income tax due of $1,000 and in 2014 you're earning enough that your year-end tax bill will be $5,000. You won't incur any penalties so long has you've withheld (or paid in EVs) at least $1,000.

e.g. 2: In 2013 you had income tax due of $5,000 because you were working before you quit to go to school, but in 2014 you're only going to earn enough to incur a $1,000 tax liability, you only need to have withheld (or paid in EVs) at least $900.

[Anonymous User]

I would HIGHLY suggest having as little withheld as possible. I claimed all the standard exemptions and had tax withheld as if I was making $160k last summer, which entitles me to a refund of about $6500. But the IRS is holding my refund "for further review", so I have no idea when I'll actually get the money. This has happened to several other former SAs at my school as well. It's super frustrating because I really need the money and they haven't given a timeline of when they'll be done reviewing it.

[Anonymous User]

I would HIGHLY suggest having as little withheld as possible. I claimed all the standard exemptions and had tax withheld as if I was making $160k last summer, which entitles me to a refund of about $6500. But the IRS is holding my refund "for further review", so I have no idea when I'll actually get the money. This has happened to several other former SAs at my school as well. It's super frustrating because I really need the money and they haven't given a timeline of when they'll be done reviewing it.

Yikes. Yeah I used IRS withholding calculator and had no problems. I think that's the way they want you to handle this situation, so if you deviate it looks weird. Still got a nice refund thanks to lifetime learning.

[Jackie U]

I withheld as little as possible and then filed electronically on the first possible day to file. I received the direct deposit within a week! Still haven’t filed state since they want money (how tacky).