question regarding claiming married on W-4

[sarcasticgirl]

DH and I left our w-4 info the same (single and 1) when we got married a couple of years ago. yes, we're those people that loan the govt. interest free money. i know, i know. 
in late 2012 his company was bought out and when switching over payroll apparently he switched his w4 to "married" 


Apparently that status change to married made a HUGE difference in our return even though the income taxed at the "married" rate was less than 1/3 of his yearly income. it brought our return down to nearly nothing. 

I admit that I know very little about the tax system and how things work... but I was under some silly impression that since we are married with no children, then marking married on the w-4 with no extra allowances would cause the "correct" amount of taxes to be taken out and perhaps we'd break even. apparently if either of us had claimed "Married" for our entire income that year, we'd owe a huge chunk of change! 

can anyone who has some grasp of this help makes sense of it for me?

[mwcpa]

tax is based on total income....

so, you need to combine your income.....

in many cases, dual income, not kids couples pay a higher level of tax than would have been if you were each single....

the tax system though gives the "traditional" family (social engineering at its best) of Dad works Mom raises the kids a big break.... Dad would have paid more if he was single....

[siralynn]

"Married" withholds a lot less than "single" because it assumes that the second spouse isn't working.

[taxref]

The above answers are correct, and I'm just phrasing those replies differently.

For 2012 the standard deduction for a single person is $5,950.  Its double that ($11,900) for a married couple.  When an employer figures payroll income tax withholding, the employer uses those standard deduction amounts as part of the computations.

If Spouse A and Spouse B each put single on their W-4, each employer will use a standard deduction $5.950 when computing the employee's withholding.   If those 2 spouses then file married joint, they well get a standard deduction on their return of $11,900.  The standard deduction on the tax return will match the combined standard deductions used by the employers to figure withholding.

If one of the spouses puts married on his W-4, his/her employer will use 11,900 when computing withholdings.  The other spouse who listed single on the W-4 will have $5,950 used by his/her employer  That is a total of $17,850 used when determining how much to withhold.  The pair, however, will only be able to deduct $11,900 on their tax return. 

The only correct way to fill out a W-4 is to first project the family's (not the individual's) tax situation for the upcoming year.   More accurate withholdings can then be determined.  The W-4 has a worksheet for that purpose.  Its long and complex, but its really the only accurate method.

[TheOtherMe]

You also want to consider whether or not you wish to make the government an interest free loan, i.e. a refund.  If that is your goal, you do what more tax withheld and would want to put Single and however many exemptions on your W-4.  If you want to attempt to break even, that is when it gets complex.

I attempt to come within +/- $100 every year.  This year I failed miserably and made the government an interest free loan.

[sarcasticgirl]

Thanks for the info everyone. It is much clearer now! 

[thyme4change]

Definitely have him change it for 2013, or you are going to end up owing next April - and it may be significant. Unless you don't mind owing - but just be prepared either way.

[sarcasticgirl]

Thyme- he's changed it, though it won't take effect for a couple of pay periods. two months of lower taxes taken out won't have us owing, but won't give us a big return- so it works, I suppose.