How many tax withholding allowances should my wife and I claim on our W-4s?

Wait, they got rid of allowances? Shows how long it's been since I've updated my W-4! Should we both fill out new forms then? And is "Married but withhold at higher Single rate" basically the same as me claiming 1 allowance like I used to?

Yes, you should both complete new W-4 forms. The "Married but withhold at higher Single rate" option is somewhat similar to the old system of claiming fewer allowances, but it's more accurate for two-income households. This option essentially tells your employer to withhold taxes at the higher single rate while still recognizing your married status. If you want to be more precise, use the IRS Tax Withholding Estimator online. Enter your expected income, deductions, and other tax situations, and it will give you specific dollar amounts to put on your new W-4. This is especially helpful for two-income households where the difference between your salaries is significant.

Does this actually work for calculating the right withholding for next year? I'm in a similar situation and my tax guy just says "pay quarterly estimates" which is a pain to remember.

I'm skeptical. Couldn't you just use the free IRS calculator? What makes this worth paying for? Does it handle complicated situations like rental income or self-employment?

Yes, it works really well for calculating next year's withholding. It analyzes why you're underwithholding and gives you the exact numbers to put on your new W-4. No more guesswork! It definitely offers more guidance than the IRS calculator, especially for complicated situations. The IRS tool is good but can be confusing to use. This breaks everything down step-by-step and handles things like rental income, self-employment, and multiple jobs. It even shows you the math behind its recommendations so you understand why you were underwithholding.

Wait I don't understand - how does this get you through to the IRS faster? I thought it was impossible to get anyone on the phone there?

This sounds like a scam. How could a third-party service possibly get you through to the IRS faster than calling yourself? The IRS phone system is the same for everyone.

It uses an automated system that navigates the IRS phone tree and waits on hold for you. Once there's an actual agent ready to talk, it calls your phone and connects you directly. No more sitting on hold for hours! They use a technology that essentially waits in the phone queue for you. You get a text when an IRS agent picks up, and then you're connected immediately. It saved me literally hours of hold time and frustration. The IRS phone system is the same, but this service does the waiting part for you.

That's really helpful actually. Is that something I can just write in on the form? Like a specific dollar amount to take out extra? How did you figure out that $50 was the right amount?

Yes, on the current W-4 form, line 4(c) is specifically for additional withholding. You just write in the extra amount you want withheld from each paycheck. We calculated our $50 amount by looking at how much we owed last year ($1800) and divided it by the number of paychecks we each get annually (we both get paid bi-weekly, so 26 paychecks each). That gave us about $35 per paycheck, but we rounded up to $50 to be safe. It's not a perfect science, but it worked well for us. You could do the same calculation based on what you've owed in previous years.

I tried it but found it confusing tbh. Ended up just doing what someone suggested above - using the "married but withhold at higher rate" option and adding a little extra. Way easier and had the same result.