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the new w4 form

Technical topics regarding tax preparation.
#1
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this is ridiculous what the IRS did to the new W4 form. its so ridiculous that i feel i need to charge for this. OMG. can someone tell me how do i get the equivalent of 8 allowances. I have a client whose spouse lost their job and i want to be able to have the working spouse to get more in the paycheck. i have used the tables for the reverse situation, where two working spouses. Thank you
 

#2
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So, you want to help your client fill in a false W-4? The thing that they are signing under penalties of perjury?
 

#3
Frankly  
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Don't blame IRS for republican tax "reform".
 

#4
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missingdonut wrote:So, you want to help your client fill in a false W-4? The thing that they are signing under penalties of perjury?


who said anything about false? The law has always allowed you to claim as many allowances as you want . its part of tax planning.
 

#5
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Frankly wrote:Don't blame IRS for republican tax "reform".


Sorry not republican tax reform. Congress tax reform. They are all in this together. both sides of the aisle :D
 

#6
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brute force wrote:who said anything about false? The law has always allowed you to claim as many allowances as you want . its part of tax planning.


Could I get a citation for "the law has always allowed you to claim as many allowances as you want"? Title 26 Code or Regulations, please.
 

#7
Wiles  
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I recommend purchasing CFS W-4 Calculator. It's not expensive. They have a gross-to-net worksheet where you can toggle between the old W-4 and the new W-4 to help you get the equivalent of what 8 allowances was on the old form.
 

#8
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Could I get a citation for "the law has always allowed you to claim as many allowances as you want"? Title 26 Code or Regulations, please.
Laws state what you aren't allowed to do. Can you give a cite that says you can't fill out a W4 in a manner that generates accurate withholding?
 

#9
AlexCPA  
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SlipperyPencil wrote:
Could I get a citation for "the law has always allowed you to claim as many allowances as you want"? Title 26 Code or Regulations, please.
Laws state what you aren't allowed to do. Can you give a cite that says you can't fill out a W4 in a manner that generates accurate withholding?


26 CFR § 31.3402(i)-2 - Increases or decreases in withholding.

§ 31.3402(i)-2 Increases or decreases in withholding.

(b) Decreases in withholding. [Reserved]


My professional opinion with regard to this matter is [Reserved].

Kidding aside, the pertinent guidance appears to be contained within 26 CFR § 31.3402(m)-1 - Withholding allowances (emphasis mine):

(c) Definitions -

(1) Estimated. The term “estimated” as used in this section to modify the terms “deduction”, “deductions”, “credits”, “losses”, and “amount of decrease” means with respect to an employee the aggregate dollar amount of a particular item that the employee reasonably expects will be allowable to him for the estimation year under the section of the Code specified for each item. In no event shall that amount exceed the sum of:

(i) The amount shown for that particular item on the income tax return that the employee has filed for the taxable year preceding the estimation year (or, if such return has not yet been filed, then the income tax return that the employee filed for the taxable year preceding such year), which amount the employee also reasonably expects to show on the income tax return for the estimation year, plus

(ii) The determinable additional amounts for each item for the estimation year.

The determinable additional amounts are amounts that are not included in paragraph (c)(1)(i) of this section and that are demonstrably attributable to indentifiable events during the estimation year or the preceding year. Amounts are demonstrably attributable to identifiable events if they relate to payments already made during the estimation year, to binding obligations to make payments (including the payment of taxes) during the year, and to other transactions or occurrences, the implementation of which has begun and is verifiable at the time the employee files a withholding exemption certificate claiming withholding allowances relating thereto. The estimation year is the taxable year including the day on which the employee files the withholding exemption certificate with his employer, except that if the employee files the withholding exemption certificate with his employer and specifies on the certificate that the certificate is not to take effect until a specified future date, the estimation year shall be the taxable year including that specified future date. It is not reasonable for an employee to include in his or her withholding computation for the estimation year any amount that is shown for a particular item on the income tax return that the employee has filed for the taxable year preceding the estimation year (or, if such return has not yet been filed, then the income tax return that the employee filed for the taxable year preceding such year) and that has been disallowed by the Service as part of a proposed adjustment described in § 601.103(b) (relating to examination and determination of tax liability) and § 601.105(b) (relating to examination of returns).


This guidance appears to allow estimates for purposes of completing Form W-4. Also, "indentifiable" appears to be a typo in the regs.
Even more of my antics may be found on YouTube:
https://www.youtube.com/channel/UCXDitB ... sMwfO19h7A
 

#10
supdat  
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missingdonut wrote:So, you want to help your client fill in a false W-4? The thing that they are signing under penalties of perjury?


How did you leap to that conclusion from the OP?
 

#11
Joan TB  
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Missingdonut: The Form W-4 has never been about "how many dependents do you have" even though that has always been the simplest explanation. It is actually "withholding allowances". A withholding allowance is considered equal to the personal exemption amount on the form. For example, the TP has $33,600 of items that will reduce his taxable income, then TP might want to claim 8 withholding allowances (8 x $4200). That doesn't mean he has 8 kids.

A few years ago, I had a client who made an impressive salary. However, he was in the oil/gas business, and there were deductions coming that we knew would lower his taxable income. (think IDC and depletion, etc.) Anyway, we calculated his W-4 claiming Married-14. His employer sent a copy to the IRS (which was required for claiming allowances >10 back then) and the TP got a letter from the IRS. We provided our calculations and the IRS was OK with it.
 

#12
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supdat wrote:How did you leap to that conclusion from the OP?


I thought the context and manner that the question was asked made it fairly obvious that the OP wasn't completing an accurate W-4.

SlipperyPencil wrote:
Could I get a citation for "the law has always allowed you to claim as many allowances as you want"? Title 26 Code or Regulations, please.
Laws state what you aren't allowed to do. Can you give a cite that says you can't fill out a W4 in a manner that generates accurate withholding?


A taxpayer shall fill in their W-4 in the manner prescribed under §3402 and its regulations, as AlexCPA has already partially brought up citations for. The old allowance regime was further detailed under §31.3402(m)-1. Perhaps you should be interested in this:

§ 31.6682-1 wrote:(a) Civil penalty. If any individual makes a statement under section 3402 (relating to income tax collected at source) which results in a lesser amount of income tax actually deducted and withheld than is properly allowable under section 3402 and, at the time the statement was made, there was no reasonable basis for the statement, the individual shall pay a penalty of $500 for the statement. There was a reasonable basis for a statement of the number of exemptions an individual claimed on a Form W-4, if the individual properly completed the Form W-4 by taking into account only allowable amounts for items which are allowable and by computing the number of exemptions in accordance with the instructions on the Form W-4. This penalty is in addition to any criminal penalty provided by law. This penalty may be assessed at any time after the statement is made, until the expiration of the applicable statute of limitations.


I won't get into the criminal penalties because I don't expect they are relevant to this situation.

Joan TB wrote:A few years ago, I had a client who made an impressive salary. However, he was in the oil/gas business, and there were deductions coming that we knew would lower his taxable income. (think IDC and depletion, etc.) Anyway, we calculated his W-4 claiming Married-14. His employer sent a copy to the IRS (which was required for claiming allowances >10 back then) and the TP got a letter from the IRS. We provided our calculations and the IRS was OK with it.


You properly calculated and filled in a W-4 for the taxpayer, and because you did so you were able to have the correct withholding for your client while protecting against the penalty. Well done, and I hope your client appreciated your professional work!
 

#13
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Wiles wrote:I recommend purchasing CFS W-4 Calculator. It's not expensive. They have a gross-to-net worksheet where you can toggle between the old W-4 and the new W-4 to help you get the equivalent of what 8 allowances was on the old form.


thank you. this sounds grreat
 

#14
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Joan TB wrote:Missingdonut: The Form W-4 has never been about "how many dependents do you have" even though that has always been the simplest explanation. It is actually "withholding allowances". A withholding allowance is considered equal to the personal exemption amount on the form. For example, the TP has $33,600 of items that will reduce his taxable income, then TP might want to claim 8 withholding allowances (8 x $4200). That doesn't mean he has 8 kids.

A few years ago, I had a client who made an impressive salary. However, he was in the oil/gas business, and there were deductions coming that we knew would lower his taxable income. (think IDC and depletion, etc.) Anyway, we calculated his W-4 claiming Married-14. His employer sent a copy to the IRS (which was required for claiming allowances >10 back then) and the TP got a letter from the IRS. We provided our calculations and the IRS was OK with it.


thank you for that Joan TB. That was a great elaboration of the issue
 

#15
supdat  
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I thought the context and manner that the question was asked made it fairly obvious that the OP wasn't completing an accurate W-4.


I didn't get that. I thought the OP was trying to complete the W-4 such that the correct amount of tax would be withheld for the married couple, i.e., not too much. This is what the new W-4 is supposed to be designed to accomplish.
 

#16
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A taxpayer shall fill in their W-4 in the manner prescribed under §3402 and its regulations, as AlexCPA has already partially brought up citations for. . . . .
So there are no citations that disallow filling out a W4 to get accurate withholding and in fact the citations specifically allow it.
 

#17
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now that we have determined it is ok to do this, what is the best way/how can i fill this out to get the 8 allowances i am looking for
 

#18
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probably have to mess around with numbers in #4b to get the withholding you want
 


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