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How to handle summer taxes
Posted: Mon Apr 25, 2022 10:52 pm
by Anonymous User
I will be a SA in CA, I was wondering how much withholding I should put down for taxes. My firm wants us to file our HR paperwork in advance which is why I'm asking now. I know they'll tax me like Im making 200k so I should do a ton of withholding but I can't figure how much to put down.
Re: How to handle summer taxes
Posted: Mon Apr 25, 2022 11:41 pm
by Anonymous User
Why would you be taxed at 200k? Your income for calendar year 2022 will be 40k.
Re: How to handle summer taxes
Posted: Mon Apr 25, 2022 11:51 pm
by Sackboy
OP, I think you're a bit confused. You will be taxed as if you make $200k in the sense that the firm will be withholding from your paycheck as if they were going to pay you for the entire year, which would total $200k. For purposes of the tax man/woman, however, you only owe taxes on approximately $40k. This means that the firm will massively over withhold, and you'll get a very fat tax refund in 2023. There isn't really much of a way around this. Just take as many withholding exemptions as possible and wait for your sweet refund next year.
Re: How to handle summer taxes
Posted: Tue Apr 26, 2022 12:09 am
by Anonymous User
OP here, sorry I was not clear with my original post. I know that I wont owe taxes as if I will be making 200, but the gov will automatically withhold money as if I was. I would rather not wait for the tax refund and just keep the money I earn.
I can select the maximum amount of deductions, but I think that would still result in a massive tax return. I can elect to withhold a monetary amount from each paycheck, I am asking if anyone knows what that dollar amount should be to make my withholding accurate.
edit: i just got off my lazy ass and did the math myself. I'm pretty sure I'll be making ~34k post tax so I should elect to withhold ~600 per paycheck to be the most efficient. Would love if someone smarter than me could confirm.
Re: How to handle summer taxes
Posted: Tue Apr 26, 2022 11:00 am
by almostperfectt
I'm not going to confirm your amount of taxes, but I will explain how to properly fill out your w4.
Firstly, you are correct, the withholding doesn't guess how much you will make a whole year. What it does is withhold based on your weekly pay assuming you will make that much all year. But you won't.
The first step is to add up the gross pay you will make the summer. Summers/First years make 215k. So that's about 4100 a week rounded. Then you multiply that amount by the number of weeks of your summer program. 10? I guess? So about 41000 gross pay. Subtract standard deduction. Subtract any additional deductions (probably won't have any if you're here asking about taxes) Then insert that into the tax bracket for 2022. Use this site
https://www.nerdwallet.com/article/taxe ... x-brackets. Note that if you plan on contributing to HSA, 401k etc., your gross pay will be lower. Keep that in mind.
Subtract any tax credits you have like child tax credit or whatever. That final number is your taxes owed for the year. Divide that number of taxes owed for the year by the number of paychecks you'll have (not necessarily the number of weeks worked) and you have your golden number.
On the w4, fill out step 1 correctly, ignore step 2, put whatever for step 3 if you have dependents (it doesn't actually matter but don't lie on these forms), and on step 4, put 0 for 4a, put some really high number for 4b (like 700,000), and then for 4c put that above mentioned golden number.
If you receive your first paycheck before you have a chance to do all of this, you may have to do some math to find your golden number. Take your final taxes owed for the year, subtract the amount withheld in the first check, and then divide by the remainder of checks for the summer.
Note: some states (like NY) won't let you do this on the state withholding form. Basically robbery but it is what it is. This is not legal, accounting or tax advice. If you fuck this up I am not responsible for your tax bill.
Re: How to handle summer taxes
Posted: Tue Apr 26, 2022 11:08 am
by Anonymous User
Also to note that if you underwithhold you face no penalty if you had no tax bill in previous year (ie, taxes you just filed, which you shouldn't because you were a student). So withhold as little as possible and worse case you have to pay taxes in a year. But you won't. State taxes are weird tho so withhold those.
Re: How to handle summer taxes
Posted: Tue Apr 26, 2022 11:16 am
by Anonymous User
almostperfectt wrote: ↑Tue Apr 26, 2022 11:00 am
I'm not going to confirm your amount of taxes, but I will explain how to properly fill out your w4.
Firstly, you are correct, the withholding doesn't guess how much you will make a whole year. What it does is withhold based on your weekly pay assuming you will make that much all year. But you won't.
The first step is to add up the gross pay you will make the summer. Summers/First years make 215k. So that's about 4100 a week rounded. Then you multiply that amount by the number of weeks of your summer program. 10? I guess? So about 41000 gross pay. Subtract standard deduction. Subtract any additional deductions (probably won't have any if you're here asking about taxes) Then insert that into the tax bracket for 2022. Use this site
https://www.nerdwallet.com/article/taxe ... x-brackets. Note that if you plan on contributing to HSA, 401k etc., your gross pay will be lower. Keep that in mind.
Subtract any tax credits you have like child tax credit or whatever. That final number is your taxes owed for the year. Divide that number of taxes owed for the year by the number of paychecks you'll have (not necessarily the number of weeks worked) and you have your golden number.
On the w4, fill out step 1 correctly, ignore step 2, put whatever for step 3 if you have dependents (it doesn't actually matter but don't lie on these forms), and on step 4, put 0 for 4a, put some really high number for 4b (like 700,000), and then for 4c put that above mentioned golden number.
If you receive your first paycheck before you have a chance to do all of this, you may have to do some math to find your golden number. Take your final taxes owed for the year, subtract the amount withheld in the first check, and then divide by the remainder of checks for the summer.
Note: some states (like NY) won't let you do this on the state withholding form. Basically robbery but it is what it is. This is not legal, accounting or tax advice. If you fuck this up I am not responsible for your tax bill.
Thank you so much! This was SUPER helpful and I really appreciate you taking the time to write this out.