• Posts
  • RSS
  • ◂◂RSS
  • Contact

  • US Taxes: Adjust Withholding When Donating?

    April 12th, 2022
    ea, money  [html]
    A friend recently asked:

    I am considering increasing my donation amount to a 2-digit percentage of income, and was wondering about the logistics of federal/state income tax withholdings.

    Do you have your employer reduce withholdings upfront? Was it simple to have them do so? Or rather ask the IRS for a refund a year later?

    This is a good question! When you start a job in the US, your employer will generally withhold Federal and State taxes. Their goal is that when you file taxes you will be close to neutral: neither owing the government additional tax nor getting a large refund. Since the amount of tax that you owe will depend on your individual tax situation, however, your employer needs some information from you to figure out how much to withhold, and they'll have you fill out Form W4 (pdf).

    This used to be pretty awkward, with a system of "allowances", but a few years ago the form was reworked and is much better. There is now a section for "deductions", and you can put your planned donations there. The IRS has an online calculator that is pretty good.

    Since you normally only fill this out when you start a new job, if you're making a big change to your taxes, like a large increase in donations, you should ask your employer for a new W4 to fill out.

    If your state also has an income tax (most states) then it likely has a different form, (ex: in MA it's Form M-4, in CA it's DE 4), and unfortunately they generally still use an "allowances" system. If your state doesn't allow you to deduct donations (ex: MA and NJ) these forms are relatively easy to figure out because you just put down your information like anyone else. If your state does (ex: CA, NY), it probably has a much lower limit than the federal government (table), so when following the instructions only consider the amount that you plan to donate that your state will count.

    Overall, if you've done this correctly, when it's time to file taxes next year you should be looking at a small bill/refund. If you are off, however, as long as you adjust for next year you should be fine: the rules for underpayment are relatively friendly as the IRS goes.

    Comment via: facebook, lesswrong, the EA Forum

    Recent posts on blogs I like:

    Economics: not as bad as I thought

    Also, it's not all about money. The post Economics: not as bad as I thought appeared first on Otherwise.

    via Otherwise May 13, 2022

    Buckingham Palace

    I love England. Especially because of the big castle called Buckingham Palace. I got to see the outside there, but my mom showed me some pictures of the inside. I love it there. But the outside doesn't look very fancy to me. But I never knew why those …

    via Anna Wise's Blog Posts April 25, 2022

    What is causality to an evidential decision theorist?

    (Subsumed by: Timeless Decision Theory, EDT=CDT) People sometimes object to evidential decision theory by saying: “It seems like the distinction between correlation and causation is really important to making good decisions in practice. So how can a theor…

    via The sideways view April 17, 2022

    more     (via openring)


  • Posts
  • RSS
  • ◂◂RSS
  • Contact