Tax deductions and payrolls for pharmacist question

[pharmagirl1818]

Hi, I’m a new grad. Starting working as rph since last year July. After reading helpful inputs from others here, I realized I had too much tax being taken out during the year which is resulting in a high tax refund.

I rather get enough taken out so that my refund is close to $0 so I could use that money in investment, saving account or stocks.

How do you go bout that? How do u adjust ur tax allowances and withholding that I had just enough taken out not to get refund?

I paid 9k in federal taxes and showing I’ll get back 7.6k.

I rather that 7.6k during the year so I can use it on other sources, and not have the govt hold it.

Thanks!


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[alpha12]

So you only paid $1600 in taxes? That doesn't seem right if you are a pharmacist.

 

[3boooda]

That is not right. How did you get 7.6 k back? I think you need to double check that

 

[pencilandpen]

doesnt sound right, give us all the numbers or we cant help you. are you single? got dependents? what was you total income last year?
only having 9k deducted for federal taxes sounds low to begin with if you're making 100k

 

[mentos]

doesnt sound right, give us all the numbers or we cant help you. are you single? got dependents? what was you total income last year?
only having 9k deducted for federal taxes sounds low to begin with if you're making 100k

She only started in July so probably made closer to 50k.

 

[BidingMyTime]

Yeah, next year when you are working 12 months, instead of 6 months, your taxes will look completely different. How many exemptions are you currently listing on your W-4? If you are listing 0 exemptions, then I would up it to 1 exemption (don't go any higher than that, unless you have children.) It's hard to know how many exemptions you need, because stuff like the deductions you take can vary from person to person. Go with 1 exemption for a year that you are making 12 months pharmacist salary, and then you can adjust it next year if you need to.

 

[pharmagirl1818]

55k I made. Paid 8k In student loan interest, 9k in federal taxes, was in school still so qualified for American opportunity credit, etc


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[pharmagirl1818]

Married status with no children


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[pharmagirl1818]

Yea, next year when you are working 12 months, instead of 6 months, your taxes will look completely different. How many exemptions are you currently listing on your W-4? If you are listing 0 exemptions, then I would up it to 1 exemption (don't go any higher than that, unless you have children.) It's hard to know how many exemptions you need, because stuff like the deductions you take can vary from person to person. Go with 1 exemption for a year that you are making 12 months pharmacist salary, and then you can adjust it next year if you need to.

Yes I’m going with 1 exemption.


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[pezdispenser]

The large refund because you only work half a year as an RPh and half as a student is only a one off.

For this year, working as an RPh for the whole year you should set your W-4 like this:

- Married and both work, no children: you should both check the box that says "Married, but withhold at higher Single rate" and you can claim 4 allowances on the spouse with the higher paying job, and 0 on the other.

- ***IMPORTANT*** You should only check the "Married" box if only one spouse works. This uses the MFJ tax brackets which would be far too low if both spouses work, resulting in a large tax bill on your tax return.

- Single, one job, no children: the baseline is 2 allowances which accounts for the $12,200 standard deduction.

- Generally, you can increase your allowances by 1 for every $4,200 you have in itemized deductions over the standard deduction, or decrease them by 1 for every $4,200 in income that doesn't have tax withheld (e.g. interest, dividends, stock gains).

 

[6GodPharm]

The large refund because you only work half a year as an RPh and half as a student is only a one off.

For this year, working as an RPh for the whole year you should set your W-4 like this:

- Married and both work, no children: you should both check the box that says "Married, but withhold at higher Single rate" and you can claim 4 allowances on the spouse with the higher paying job, and 0 on the other.

- ***IMPORTANT*** You should only check the "Married" box if only one spouse works. This uses the MFJ tax brackets which would be far too low if both spouses work, resulting in a large tax bill on your tax return.

- Single, one job, no children: the baseline is 2 allowances which accounts for the $12,200 standard deduction.

- Generally, you can increase your allowances by 1 for every $4,200 you have in itemized deductions over the standard deduction, or decrease them by 1 for every $4,200 in income that doesn't have tax withheld (e.g. interest, dividends, stock gains).

So if both work, on federal we should choose married but withhold at a single higher rate? What about for State?

 

[pharmagirl1818]

The large refund because you only work half a year as an RPh and half as a student is only a one off.

For this year, working as an RPh for the whole year you should set your W-4 like this:

- Married and both work, no children: you should both check the box that says "Married, but withhold at higher Single rate" and you can claim 4 allowances on the spouse with the higher paying job, and 0 on the other.

- ***IMPORTANT*** You should only check the "Married" box if only one spouse works. This uses the MFJ tax brackets which would be far too low if both spouses work, resulting in a large tax bill on your tax return.

- Single, one job, no children: the baseline is 2 allowances which accounts for the $12,200 standard deduction.

- Generally, you can increase your allowances by 1 for every $4,200 you have in itemized deductions over the standard deduction, or decrease them by 1 for every $4,200 in income that doesn't have tax withheld (e.g. interest, dividends, stock gains).

“Should only check married box if ONE spouse works”

For us both of us work, so I should select single?

And what’s the rationale behind selecting married but withhold at higher single rate?

Thank you for your answers!


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[pezdispenser]

“Should only check married box if ONE spouse works”

For us both of us work, so I should select single?

And what’s the rationale behind selecting married but withhold at higher single rate?

Thank you for your answers!


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Say you earn $100k each after 401k and insurance. If you both check the Married box, then your employers will use the married withholding tables in https://www.irs.gov/pub/irs-pdf/n1036.pdf . So even if you claim 0 allowances, they will withhold $11,121 in taxes x 2 = $22,242. However, each employer doesn't know about the other spouse's income, so they cannot add it in to tax you at your appropriate combined tax bracket ($200k). Then, when you do your tax return you will add up both of your incomes and work out your taxes on the total:

$200,000
-$24,400 standard deduction
=$175,600 taxable income

Using the MFJ tax table, your taxes are $30,493. Since you only had $22,242 withheld, you will owe an additional $8,251.

But if you both check 'Married, but withhold at Single rate' and claim 2 allowances each, each employer will withhold $15,246.50 in taxes x 2 = $30,493, which is exactly what you will work out on your tax return, so you will owe nothing.

 

[alpha12]

Say you earn $100k each after 401k and insurance. If you both check the Married box, then your employers will use the married withholding tables in https://www.irs.gov/pub/irs-pdf/n1036.pdf . So even if you claim 0 allowances, they will withhold $11,121 in taxes x 2 = $22,242. However, each employer doesn't know about the other spouse's income, so they cannot add it in to tax you at your appropriate combined tax bracket ($200k). Then, when you do your tax return you will add up both of your incomes and work out your taxes on the total:

$200,000
-$24,400 standard deduction
=$175,600 taxable income

Using the MFJ tax table, your taxes are $30,493. Since you only had $22,242 withheld, you will owe an additional $8,251.

But if you both check 'Married, but withhold at Single rate' and claim 2 allowances each, each employer will withhold $15,246.50 in taxes x 2 = $30,493, which is exactly what you will work out on your tax return, so you will owe nothing.

Does the 401k need to be factored in?

 

[pezdispenser]

Does the 401k need to be factored in?

No, your 401k is already deducted before your employer calculates how much tax to withhold.

 

[pezdispenser]

So if both work, on federal we should choose married but withhold at a single higher rate? What about for State?

Sorry I don't know anything about state taxes. It would depend on what deductions they allow and how their tax withholding tables are setup.