Have a Tax Question? Ask a Tax Expert
Since you have sold your home I will assume that you no longer have enough deductions to itemize your deductions (since you won't have the mortgage interest deduction).
You should try and use the following to determine what your withholding should be - http://www.irs.gov/Individuals/IRS-Withholding-Calculator
This is great resource and is quite accurate.
Ultimately you will need to provide your employer with a new W-4 to change your withholding amounts. See Form here - http://www.irs.gov/pub/irs-pdf/fw4.pdf
The link at the IRS site for the withholding calculator does not work. I have tried on 3 different computers. I get an error message each time and have not been able to access the calculator.
It's a short sale, so I won't make any money on it. Yes, I am concerned about how my taxes will change now that I am no longer a home owner. My main concern is how many state and federal allowances I should now claim so that I get as much take-home pay as possible without ending up owing taxes. Thanks in advance for your help.
The simple answer, which is probably the answer that you accountant told you, is to base your withholding on the number of exemptions you can claim. If you are single and have no dependent children, then you should fill out your W-4 for single and 1 allowance. Another easy answer is to go to this web address http://www.irs.gov/pub/irs-pdf/fw4.pdf which is the web address for Form W-4 and use the personal allowances worksheet to calculate the number of allowances you should claim. If this web address doesn't work for some reason, then go to www.irs.gov and click on Form W-4. Also, the expert who answered your question originally should have checked the IRS' link to their online withholding calculator. The address was correct, but for some reason the IRS' withholding calculator is down. You might try it again in the future and see if the IRS fixes the calculator.
Publication 505 "Tax Withholding and Estimated Tax" gives detailed directions on how to estimate your taxes for 2012 and check your withholding for accuracy. You can download this publication at this web address http://www.irs.gov/pub/irs-pdf/p505.pdf . If this web address doesn't work, then go to www.irs.gov , look under current year forms and publications and look for the Publication 505 by number. It has the current year estimated tax tables and gives step-by-step instructions on calculating your estimated tax and needed withholding in Chapter 1.
If you determine that you need to change your withholding, remember that you are already in the third quarter of the year, so you have November and December to make up any underwithholding for the entire year. You will need to file a new W-4 form with your employer either electronically or on paper.
Under the IRS rules, if you have withholding within $1000 of your taxes due, or if you have withheld 90% of the taxes due, or if you have withheld 100% of the total taxes due last year if you make less than $150,000 or 110% if you make more than $150,000 (note that this is total tax due not the amount of refund or balance due from last year), then while you will have to pay the balance due at tax time, you won't be penalized for underwithholding.
I hope this answers your questions. Please let me know if you need more information about this question or if you need me to clarify anything for you.
Hello, Jesse. Sorry for my delayed response, but I was waiting until customer service had transferred my $39 payment from the first expert to you. Many thanks for your great response and helpful info!
Thank you. I enjoyed working with you and I hope you will request me if you have any further questions. One thing I forgot to mention and I wanted to remind you about, is that the W-4 withholding is based on federal tax rates, not state tax rates. You should look at your California return from last year and see if your withholding will be roughly correct. You can have additional money withheld from your wages for your state taxes and you may need to, depending on any federal credits you have that don't affect your state taxes. Since state income taxes aren't deductible on my state return, I can itemize my federal return but I have to use the standard deduction for my state return. This creates a mismatch between my federal and state taxes that requires me to have additional money withheld from my wages for my state taxes.
Thanks for letting me help you and good luck. I hope to work with you again sometime.