Irs Tax Deduction Calculator
June 4th, 2008
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Question: Why is my federal withholding so low?
My 2008 income is approx. $150,000. I have filed as single with 1 exemption. When I go to the IRS website and complete the tax calculator my estimated 2008 tax is approx. $28,000. This calculation includes Itemized Deductions and 401K contributions. Based on this amount, I would expect to see a bi-monthly withholding of approx. $1,167. Yet, my paycheck has a federal withholding of only $600. I spoke with the payroll person internally and even with ADP, who processes our payroll, and they were unable to explain the discrepency, saying the system is connected to the IRS and the $600 amount is correct. How can this be accurate? Do I need to have addtional $ taken out of my check or am I missing something?
Answer: Unless you put something wrong on your W-4 or they transcribed it wrong, there is definitely something wrong with your withholding.
The tables are in IRS Publication 15 – you can download that at irs.gov – look at page 36-38. Your biweekly gross, even after allowing for all the deductions for pre-tax items and for your exemption, is most likely still around $5000 or more, and that would have a lot larger amount taken out than $600. It sounds like maybe something is coded wrong and they’re not using the biweekly chart or something. If your biweekly pay is a lot less than that and a large amount of the $150K was in some sort of one-time payment, then their calculation might be right though. But in that case 25% should have been withheld from the one time payment, so even though that wouldn’t have been quite enough your total withholding would at least be in range of what you owe.
All that said, if they did this all of 2007, then you are going to owe a ton of money when you file. Didn’t you think it was a little strange that they were taking out so little?
Good luck.
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