facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog external search brokercheck brokercheck
%POST_TITLE% Thumbnail

Transition Tax Topics: Mind Your W-4

Taxes

- Welcome to Curt's Chalk Talk, the transition tax topics series. I'm Curt Sheldon with C.L. Sheldon and Company and today we're going to talk about your W-4. 

Now you need to be careful when you fill out your W-4 because it has to do with how employers do withholding. So, let's take a scenario when you have a new job and your employer's paying you $90,000 a year. Well, they're going to withhold a portion at 0% and then on top of that they're gonna withhold a portion at approximately 10% and then just a little bit at 12%. But in reality that $90,000 sits on top of your $70,000 or so military retirement. So, instead of starting withholding at $0 or 0%, your employer should start at 12% and, oh by the way, there's going to be a pretty big portion here that's going to be taxed at 22% and if you don't make some corrections, none of your income will actually be taxed at that rate. 

So what do you do about it? Well, one option is to use the IRS's W-4 calculator. I personally like to use the 1040 ES where you go in and estimate your tax return and figure out what you're going to owe. Then you can go into My Pay and adjust your withholding to say take X amount extra from my pay to make sure, from my retirement pay, to make sure I have my taxes covered. If either of those two are too complicated for you, make sure at least you take the time to do the W-4 correctly. And when it's all said and done, if you're hitting around 150,000, $160,000 worth of income, you should expect to withhold somewhere around $20,000 in total taxes because that's what you're going to owe at the federal level. 

Are you concerned about your finances as you make the transition from active duty to the civilian world? Well, we can help. Check out our financial checklist available at www.clsheldon.com/tax. For free at www.clsheldon.com/tax.


Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.