How can my son cut his withholding taxes on a summer job


D

David Schwartz

My son's home from college for the summer and got an unbelievably well paid
internship in an accounting firm. It is a 10 week gig at $23 per hour. He
just got his first paycheck for two weeks, and for $1800 gross, they
withheld approximately $500 ($288 federal, $114 social security, $27
Medicare and $90 New York State income tax.) I understand that $920 a week
for 52 weeks comes to nearly $48K, so they withheld him according to that
estimated income. But his annual income will only be for these 10 weeks,
grossing $9200. He does have investment income, due to a lump sum received
due to an auto accident. Last year, his taxable interest and dividends
totaled $7700 and capital gains was actually in the red and he paid $761
federal taxes, $364 NYS. By plugging his anticipated annual income into last
year's Turbo Tax, which should be a pretty good estimate, his expected
federal tax would come to $1319 and NYS $797. I am going under the
assumption that federal taxes include social security and Medicare withheld
(am I right on that?) So, anyway, his federal taxes should come to $1319
and they already withheld $428. If he gets 4 more paychecks, they will have
taken $2140, or over a thousand more than they need. I know he will get a
refund at the end, but being a college kid, he could stand to have that as
he goes. How can he fill out the W-4 (assuming that is what he should do)
to get reduce his withholding to $831 total or $207 per check? The only
adjustment that I see on the form to lower his withholdings is to increase
his allowances on line 5, but how many allowances, would bring his
withholding down to $207. It seems easy, but complicated. Are there any
charts anywhere that would help him to figure out how to do this? Any help
on anyone's part would be appreciated. Thanks in advance.
 
J

Jim Kingdon

I am going under the assumption that federal taxes include social
security and Medicare withheld (am I right on that?)
I don't think so.

If you look at the instructions for line 64 of the 2006 form 1040, it
says that the withheld taxes are from box 2 of form W-2 (which doesn't
include the social security and Medicare). So assuming that by
"federal taxes" you mean line 57 of form 1040, then you wouldn't
include the social security and Medicare. The latter don't ordinarily
show up on form 1040 (with a few exceptions like self-employment).
 
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D

David Schwartz

Thank you, but that was the least important part of my question. How can we
adjust his withholding to reflect the fact that this is a 10 week summer
job, not a 52 week one?
 
J

Jim Kingdon

Thank you, but that was the least important part of my question.
How can we adjust his withholding to reflect the fact that this is a
10 week summer job, not a 52 week one?
If I followed your numbers correct, you don't really need to any more
(the summer job bit seems to cancel out the investment income within
$100 or so).

But your mileage may vary and don't take my word for it and all.

And the short answer to whether you can adjust the withholding is: I
don't know.
 
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E

Ernie Klein

David Schwartz said:
Thank you, but that was the least important part of my question. How can we
adjust his withholding to reflect the fact that this is a 10 week summer
job, not a 52 week one?
Submit a new W4 form to the employer and claim more exemptions. How
many more? Use the worksheets that are part of the W4 form. There is
also a withholding (W4) calculator on the IRS website to assist in
filling out the form.

http://www.irs.gov/individuals/article/0,,id=96196,00.html
 

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