Medlin Software, Dennis Posted April 30, 2009 Report Share Posted April 30, 2009 For that those that help clients with withholding... CA has changed WH effective immediately. All brackets are up .25% in an effort to minimize under withholding due to the .25% tax hike for 2009. Employers will not be getting new booklets for at least a couple more weeks. Also, the low income exemption amount was lowered a bit, subjecting certain lower income folks to CA WH. CA WH Update Info AZ is updating their "percentage of FWH" state withholding May 1. This appears to be an effort to minimize under withholding due to the lower FWH rates from the tax stimulus. Better still, in July 2010, AZ will begin withholding using their own formula/tables instead of relying on FWH. Those states using FWH in their calculation are likely tiring of getting Bush, Bush, and now Obama'd (mid-year FWH changes). There are only a few states left that adjust their WH based on FWH - AZ is the last state using a percentage of FWH as their withholding method. AZ WH Update Info NY changes significantly beginning May 1. NY WH Update Info (I don't make the withholding rules, I make a living dealing with them...) Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted April 30, 2009 Report Share Posted April 30, 2009 To avoid all this confusion, I have gone exempt on my withholding. I will just make it all up on my bonus at the end of they year. Since withholding is considered to be taken out ratably throughout the year, no underwithholding penalty. I tried just going M12, but the CA tables still were taking too much. It is cool being the controller for the company, because I can just pop into the software and make the changes when I want to. So long as I don't get fired just before the bonus is paid, this strategy will work like a charm. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
Medlin Software, Dennis Posted April 30, 2009 Author Report Share Posted April 30, 2009 Similar to what I do. Not exempt, but a large enough number of allowances to have little/no withholding for 11 months, and to not go over 10 allowances for CA (in CA 11 or more allowances requires employer to send a copy to the state, Fed did away with that issue). In Dec, I figure my liability and have it withheld as additional, just enough to avoid penalty. I take a weird pride in having to make payments in April instead of loaning money with no interest. I did have to deal with an IRS lock in letter the first year they started those, but a quick phone call and the rep's review of some records got the letter rescinded. A lock in letter could be embarrassing in some cases. Even if one has to deal with a less than cooperative employer/payroll department, an employee can make this work as long as they change their withholding information in November, in case the employer takes advantage of the 30 day window to implement the changes. What makes it funny (to me) is my first job where I made enough to be subject to withholding was one where I was also doing the payroll, and I figured out this strategy way back then. I don't understand why so few adopt a similar strategy - although I suppose it is simple fear of the government. --- While not a tax preparer, I can safely guess far too many clients judge service on how big their refund check is, so preparers have no incentive to offer withholding advice, no matter how sound it may be... Quote Link to comment Share on other sites More sharing options...
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