The Small Business Tax Help Blog

Posts Tagged ‘how does federal tax withholding work’

Question: Why do some owe money and others get a refund for their taxes?

i file my taxes every year no matter how little i make but i still dont understand how doing your income taxes work. how come some of us owe money and others get a refund? if there’s an amount in the federal withholding doesnt that mean you should automatically get some money back? my boyfriend has worked part-time at the same job for more than 3 yrs and he some how has owed money to the IRS every year. how come he gets nothing back? in what conditions will one owe money and in what conditions will one get a refund?

Answer: This s very complicated. When you get hired, you are required to fill in a Form-4. Witholding is done according your no. of exemptions. The tax tables take into consideration you are working for a full year thus the witholding amounts. If you filled out your Form-4 truthfully to match your tax returns and you worked less that a full year even if you file a short form (no deductions), chances are you will always get a refund. Also the tax tables are set up that we pay as we go and there is a cushion to avoid you from having to pay with you tax returns if all you have is personal-service income.

Your boyfriend probably lied on his W-4, so the amount witheld on his part-time job is in-sufficient if he claimed exemptions incorrectly. Even part-time one can earn a substantial income. If he has filled out his W-4 correctly then the question is that he probably has other income that gets reported and he dosen’t understand that one is taxed on all their income unless it is deived from tax-exempt sources.

Example; One works part-time, let say 3 days a week (21 hours) for a full year and makes about $500.00 a week, has no dependents but claims 2 or 3 exemptions, that person is going to be underwitheld. Part-time does not always mean a small amont of money being earned. It means you are not a full time employee and you have no benefits maybe and/or is hired to perform duties that are performed in a way that does not impact anyone else in your absence or limited capacity. The flip side, this person claims no 0 dependents, they are definitely going to get a refunds from both the Federal and State.

Hope this clears it up a bit for you.

Casino expects no issues from deadbeat withholding

MICHIGAN CITY — Blue Chip Casino isn’t expecting any problems when it has to implement a system to withhold gambling payoffs to deadbeat parents next year, said David Strow, spokesman for Boyd Gaming, the owners and operators of Blue Chip Casino.

Recovery: Making Work Pay-Claim It – Jan 10