How to adjust W4 withholding to prevent large tax refunds next year

8 Wait, you can put a negative number on line 4(c)? I thought that line was only for requesting ADDITIONAL withholding, not less. Wouldn't you use line 4(b) for deductions instead? I'm confused because my HR department told me something different. Also, is there any risk of penalties if you adjust too much and end up owing?

5 You're right, and I should clarify - line 4(c) is for additional withholding, so you can't put a negative number there. My mistake! For reducing withholding, you'd want to use line 4(b) where you can list deductions that would reduce your withholding. You can estimate your total annual deductions (mortgage interest, charitable contributions, etc.) minus the standard deduction, and enter that amount. Alternatively, you could use the multiple jobs worksheet or tax withholding estimator on the IRS website to calculate a more precise figure. Regarding penalties, there is a risk if you underwithhold too much. The safe harbor rules generally require you to pay either 90% of this year's tax liability or 100% of last year's tax liability (110% if your AGI was over $150,000) through withholding to avoid penalties. As long as you meet one of these thresholds, you should be fine.

7 How accurate was it really? I've tried those online calculators before and they always seem to be way off for my situation. I get quarterly bonuses that mess up the calculations. Does taxr.ai handle variable income well?

14 I'm kinda skeptical about these tax tools... how does it compare to just using the IRS withholding estimator? That's free and from the actual IRS. Is there something this service does that's worth it compared to the IRS tool?

12 It was surprisingly accurate for me - I was worried about the same thing! The tool actually has a specific section for irregular income like bonuses and commissions. You enter your expected bonus schedule and amounts, and it factors that into the withholding calculations. My income varies quite a bit throughout the year but the projections have been pretty spot on. The main difference I found compared to the IRS calculator is that it gives you more detailed projections and scenarios. The IRS tool is definitely good, but taxr.ai shows you multiple options side by side and projects your cash flow for the whole year with different withholding strategies. It also keeps track of your cumulative withholding throughout the year so you can make adjustments if your income changes unexpectedly.

10 Wait, so this is just a service that helps you get through to the IRS? How does that even work? The IRS phone system is a nightmare... I thought it was impossible to get through during tax season.

14 This sounds like a scam tbh. Why would I pay someone to call the IRS for me? And how would they possibly have better access than I do? The IRS wait times are long for everyone. I'm extremely suspicious of any service claiming to "skip the line.

19 It's not that they help you call the IRS - they have an automated system that keeps dialing and navigating the phone tree until it gets through to a representative. Their system holds your place in line so you don't have to sit on hold forever. When an agent is ready, it calls you and connects you directly. It's definitely not a scam. The IRS phone system is designed to handle a certain call volume, and if too many people are calling, it just rejects new calls with a busy signal. Claimyr's system basically keeps trying until it gets through that initial barrier, then holds your place in the queue. It's like having someone persistently redial for you until they get through, but automated.

1 I've tried using the IRS estimator before but got confused about how to handle my bonus. My company pays out quarterly bonuses that vary in amount. Should I be updating my W4 every quarter after each bonus to stay on track? That seems excessive but I'm tired of getting $14k+ refunds!

3 You don't necessarily need to update after every quarterly bonus, but you might want to do a mid-year check using the IRS estimator. Enter what you've already earned and had withheld so far, plus your expected income for the rest of the year. For variable bonuses, your best approach is to estimate the total annual bonus amount and include that in your calculations. If your quarterly bonuses end up being higher than expected, you could submit an updated W4 in the second half of the year. Another approach some people use is to submit a very accurate W4 for their regular salary, but then submit a separate W4 just for the pay period when they receive their bonus. This W4 would have additional withholding to make up for any potential underwithholding from the bonus. Then switch back to your regular W4 for subsequent pay periods.

17 This is not correct advice at all. You CANNOT use negative numbers on Line 4(c) of the W4. That line is for ADDITIONAL withholding only. The IRS systems don't process negative numbers there. What you're describing would be rejected by most payroll systems. Please don't spread misinformation about tax forms.

You're absolutely right - Line 4(c) is for additional withholding only and doesn't accept negative numbers. I think there's some confusion here about how to properly reduce withholding. For reducing withholding, you'd want to use Line 4(b) for deductions or work with the multiple jobs worksheet. The IRS Tax Withholding Estimator is really the best tool for figuring out the right adjustments, especially for complex situations with variable bonuses. I've been in a similar situation with large refunds, and what worked for me was using the estimator to calculate how much I was overwithholding annually, then dividing that by remaining pay periods to determine what deduction amount to claim on 4(b). Just be careful not to underwithhold too much - the safe harbor rules are important to follow to avoid penalties.

I appreciate everyone jumping in to clarify this! As someone new to adjusting withholding, this is exactly the kind of correction I needed to see. @Angelina Farar is absolutely right - Line 4 c(is) only for additional withholding, not reductions. I was getting confused about how to actually reduce the amount taken out of my paychecks. So just to make sure I understand correctly: if I want to reduce my withholding because I m'getting those massive $12k-15k refunds, I should be using Line 4 b(to) claim additional deductions that will lower my withholding throughout the year? And the IRS estimator will help me figure out what amount to put there? This whole thread has been super helpful but I want to make sure I don t'mess this up and end up owing penalties!

@KingKongZilla Yes, you've got it exactly right! Line 4(b) is where you'd enter deductions to reduce your withholding. The IRS Tax Withholding Estimator will walk you through your situation and give you a specific dollar amount to enter there. Since you're getting such large refunds ($12k-15k), you're definitely a good candidate for adjusting your withholding. The estimator will look at your income, filing status, deductions, and credits to calculate how much you're overwithholding. One tip: when you use the estimator, have your most recent paystub and last year's tax return handy. It'll ask for your year-to-date withholding and income, plus what you expect to earn for the rest of the year. This gives it the most accurate picture for calculating your adjustments. And don't worry about penalties - as long as you pay at least 90% of this year's tax liability OR 100% of last year's liability through withholding (110% if your AGI was over $150k), you'll be fine. Given your large refund history, you're likely way above these safe harbor amounts even with adjustments!

@Darcy Moore This is exactly what I needed to hear! The bonus withholding issue makes so much sense now. I never realized that the flat 22% rate could be so different from my actual tax rate. Running the estimator twice a year sounds like a really manageable approach. I was worried it would be this complicated thing I d'have to constantly monitor, but checking in after major income events like (bonuses and) then doing a mid-year check seems totally doable. Quick question - when you run it the second time in September, do you usually need to make another W4 adjustment, or is the March adjustment usually enough to get you through the year? I m'trying to figure out if I should expect to update my W4 multiple times or if one good adjustment after understanding my bonus situation will carry me through. Thanks for sharing your experience - it s'really helpful to hear from someone who s'actually solved this problem!