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K
Kp08
May 9, 2022
Solved

No federal withholding

  • May 9, 2022
  • 1 reply
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Please assist.   I have had three payroll checks and none have taken federal withholding, state and Medicare taken though. On new w4, I included the 2 dependents in section 3 which came to $4000.  Do I need to add a extra withholding in step 4 of estimate federal withholding or Will federal withholding start after gross gets to $4000.  HELP

Best answer by Rainflurry

@Kp08 

 

Whoever does your payroll will enter the $4,000 from Step 3 and the payroll software will do the rest. 

 

Most of this was driven by the Tax Cut and Jobs Act (TCJA), which went into effect in 2018.  If you were to use the pre-2020 W-4 form now, you would most likely have way too much tax withheld.   

1 reply

Rainflurry
Rainflurry
May 9, 2022

@Kp08 

 

That's not unusual. The $4,000 child tax credit from Step 3 of your W-4 is divided by the number of pay periods in a year and then that amount is credited against any federal withholding. So, for example, if your employer has 26 pay periods in a year, you get a credit of $154 per pay period ($4,000/26) credit towards your federal income tax.  That's a massive credit. 

 

If you look up the tax withholding tables in IRS Publication 15-T, you will see that if you are married filing jointly, you would need to have a biweekly paycheck of at least $2,395 ($62,270/yr) before a dime of federal income tax is withheld.  If you're head of household, you would need a biweekly paycheck of $2,120 ($55,120/yr) before a dime in federal income tax is withheld.  

    K
    Kp08Author
    May 9, 2022

    So instead of the $4000 in that box I need to have the divided account based on the salary?  This is just too much, never had these issues with old format. 

    Rainflurry
    RainflurryAnswer
    May 9, 2022

    @Kp08 

     

    Whoever does your payroll will enter the $4,000 from Step 3 and the payroll software will do the rest. 

     

    Most of this was driven by the Tax Cut and Jobs Act (TCJA), which went into effect in 2018.  If you were to use the pre-2020 W-4 form now, you would most likely have way too much tax withheld.   

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