No idea about W4 taxes...

[Lynn32203]

What is the name of your state? Indiana

Hi, I hope that this is a good place to ask this questions because I don't know much about any of this but, my husband just got his first "real" job and had to fill out his w4 for his employer. His first pay stub came back and approx 36% of the pay was taken out. It started at 5,000 and ended at 3,149.58. This seemed extrodinarily high to me. Also, the number of tax exemptions (for the W4, not for end of the year income tax return) is 5. So here are my questions:
Isn't that a lot to be taken out?
I feel like we should lower those exemptions so we hopefully don't have to pay much/anything at the end of the year...is that a good idea?
And if we lower those exemptions, are we going to be screwed...because based on this first check and how much was taken out, aren't they only going to take out more if we lower it?

Hope this makes sense and I hope someone can shed some light on this. I am not very smart about this type of thing, and I really don't want to end up screwing ourselves, but 36% just seemed outrageous based on the number of exemptions we had!! Thanks in advance for any and all advice!!

 

[Snipes5]

The exemptions will only adjust for Income tax, not SS and Medicare (Employment) taxes.

We need a lot more info to help you.

How often does hubby get paid? If that's a weekly paycheck our answers will be much different than if it's a monthly paycheck.

Does hubby have a 401K plan available at work? If so, USE IT. It will save you piles of money in taxes.

What other deductions are on his paycheck? There is no way that the entire amount they took out was "all" for taxes. Does he have pretax or after tax medical? Dental? Union dues?

How many kids do you have? What are their ages? Do you own a house? Do you have a job also? How much do you make a year? Do you have investments?

Snipes

 

[Lynn32203]

Indiana

First, thank you so much for taking the time to reply.
Okay, the check we received was like a sign-on bonus. He will be starting full-time with them in August. We are also renting right now and hoping to buy a house etc. as soon as possible, which is why I am a little crazy about knowing exactly how much money we will have. So as I said, it was a sign-on bonus but they used the same W4 info for that as they will for his paychecks to come. As far as I know he WILL have a 401k, and its good to know that will help with tax breaks. All of those other questiosn you asked about medical, union dues etc., have not been set up yet. The only things that were taken out were federal, ss, medicare, state, and county taxes.
We have a 2 year old, we're married, no house, I stay at home, no investments. Does this answer all of your questions? I hate to sound like one of those people always complaining about "how taxes are ridiculous" and such, because I know that they are necessary. But I just was just shocked, and worried when I saw how little we would end up getting. Thank you so much in advance for taking time to read!

 

[anteater]

Since this was a bonus, the company appears to have used the federal supplemental withholding rate which is 25%. This rate is used for non-regular compensation items like bonuses, severance, moving expenses, etc. This will not be the withholding rate that is used for regular salary & wages once your husband begins working.

Add the 25% to 7.65% for SS and Medicare and a couple percent for Indiana income tax and you are up to about 36%.

 

[Snipes5]

Yep, that's exactly it.