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How Much Tax Money Should Come Out of My Paycheck?

Q. I’m changing jobs and I’m not sure the best way to decide how much I should have withheld in taxes. My husband does side contract work and he doesn’t pay estimated taxes, so at my job now, I have them take out more each week to cover his taxes too so we don’t get slammed at the end of the year. Advice?

A. Figuring out — ahead of time — what taxes will be due can be a challenge. But you can make smart guesses to ease the process come April 15 .

For starters, taxes can be tough to estimate because the withholding tax schedules do not take into consideration itemized deductions, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton, N.J. They also don’t adequately account for two high-income earners where the lower tax brackets have already been filled with the first spouse’s income, he said.

“The fact that your husband does not pay estimated taxes on his side work does make things more difficult,” Hook said.

That said, the answer to your question depends largely upon the amount of income you and your husband are currently earning, said Steve Gallo, a certified public accountant with U.S. Financial Services in Fairfield, N.J.

“Without knowing what your joint tax bracket is and how much of this is attributed to your husband’s side work, giving you accurate advice would be difficult,” Gallo said.

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Gallo said if your husband’s side work is a small part of your overall income, you would most likely be able to cover his taxes through your increased withholding. However, if his income is significant, covering both the income tax and his self-employment tax could prove troublesome, he said.

In order to avoid underpayment penalties, in the event you have a balance due, the IRS requires that your total withholding tax for the

current year be equal or greater than your total tax liability for the prior year, Gallo said. If you meet this requirement and you still owe taxes there will be no penalties  assessed.

Hook said the best way to figure out  how much to withhold is to do a tax projection based on how much taxable income you think you will have in 2015.

“If you use an accountant to prepare your taxes, you should ask him or her to prepare a tax projection so that you can see how much you need to withhold,” Hook said. “If you do not use an accountant to prepare your taxes, it is more difficult to do and it probably makes sense to hire an accountant to prepare your taxes in the future.”

He said the accountant will not only help you with the tax projection, the accountant also may be able to help you find additional deductions you may not have thought of on your own.

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Karin Price Mueller is an award-winning writer and money expert. She's the founder of, a new website that offers smart and objective advice on everything money. She also writes the Bamboozled consumer affairs column for The Star-Ledger. Mueller has won several national and local journalism awards, including nods from the Society of Business Editors and Writers (SABEW), the New Jersey Press Association (NJPA) and the Financial Planning Association. More by Karin Price Mueller

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Category: Taxes

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