w-4 Deductions causing 'more' disposable income

[holding on]

I had w-4 deductions of 7 and now have to drop them to 2, as I owed taxes the past few years. But since the paralegal entering the data can only go by what was on the pay stubs the last 6 months, it makes it look like I have more disposable income. $300 more than I will really have when my paycheck is dropped to 2 deductions. Anyone have any ideas or any experience on how this can be handled? Will I have to wait til the end of the year and file an amendment? The initial bk payment is gonna kill me.

[magyar123]

Simply explain that in recent years you owed chunks in taxes because you had put down 7 exemptions on your W4, and that now you're trying to avoid the same thing happening again - which is the reason for lowering your exemptions to 2 - therefore lowering your disposable income.

[holding on]

Explain to who? I did explain that to the paralegal, but he kept saying he has to go by what the last 6 paystubs say. I will talk to the lawyer tomorrow to see.

I'm hoping that the w-4 deduction reduction (conjunction junction!) comes through on my next paycheck so that I can show that it won't be that much disposable income. Otherwise I'm gonna push to add the difference in taxes as a monthly expense item. Maybe that might work. If not I will have approximately $57 left over after all expenses

[qwertysue]

We did the same thing--we switched about a month before filing. No problems with our 341 or confirmation with the new withholding.

[holding on]

Ah! So maybe a glimmer of hope. I didn't know if a trustee sits down with your paystubs and analyzes the numbers.

[dovette7]

We also had to change our withholdings to avoid paying taxes at end of year. Our attorney listed paystub information and added the additional taxes as monthly expense in budget. She did ask us to get a letter from our accountant stating what our withholdings needed to be just in case trustee asked. There was no problem adding the additional in the monthly budget.

[Critty]

I don't have the schedules for filing bk in front of me, but I do remember in the means test that they ask how much the incurred taxes are. Which, from what I understand, means how much should be paid. Not necessarily how much is paid. My hubby and I used to have too much taken out making it more of a struggle each month (even though we got it back at tax time).

[Mrs. H]

We had our withholdings set high and ended up owing taxes, too. Now we're looking to drop them to avoid the tax hit next time. First, we need to wait for my husband's upcoming raise to offset the amount and, second, we're looking for a new (and hopefully really good) accountant. We needed the money to help live off of until I recently got a side job, but I wouldn't recommend setting dependents high to anyone.

Someone here knows of an IRS payment calculator that tells you how many dependents you can legally have to even it all out - to not get a refund and to not owe taxes. Anyone? Anyway, we decided that we don't need any more trouble (this BK13 is enough) - so we want to see what the accountant we find will say.

From the BK standpoint - our lawyer said it doesn't matter to the Trustee. The income is already set by the 6 months' prior to filing. Then again, I'm not "in love" with our lawyer, so someone else would be best to answer this for you. (Heed all the warnings on finding a really good lawyer!)

Edit - we also had to wait a long time to file due to a drastic drop in salary due to overtime cuts and company lay-offs. We had to wait so that the crucial 6 months' prior income didn't show us as having like $500+ more a month than we actually have.

Just wanted to let you know that you're not alone...

Mrs. H.

(Gee, just realized that my name makes me sound like a creditor. I'm not and "yuck!")

[chloe0724]

Mrs. H, here's a link I found on the IRS website that should help answer your question. It calculates what you should be withholding on your w-4.

http://www.irs.gov/individuals/article/0,,id=96196,00.html

[Mrs. H]

Thanks chloe!

I knew one of these resourceful people would have it!