Lately my husband changed his job from a permanent employee to an hourly paid contractor. This month we got his first pay check and we feel that the taxes withheld are less and we are scared of its impact while filing tax return for 2008. We don't want to get alarmed by a tax bill that we need to pay during next years tax filing. So how do we know if the taxes withheld from his paycheck is correct or not. I checked the FICA taxes, those are deducted correclty, but for state and federal tax, we believe the amount is too low. Please help.

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Originally Posted by Tax_learning

Lately my husband changed his job from a permanent employee to an hourly paid contractor. This month we got his first pay check and we feel that the taxes withheld are less and we are scared of its impact while filing tax return for 2008. We dont want to get alarmed by a tax bill that we need to pay during next years tax filing. So how do we know if the taxes withheld from his paycheck is correct or not. I checked the FICA taxes, those are deducted correclty, but for state and federal tax, we believe the amount is too low. Please help.

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If he is a sub contractor than they would hold no taxes out at all and he would get a 1099 and be responsible for them at the end of the year. In this case he would need to file self employment taxes each quarter.

I do not think this is the case because he is paid by the hour and also because they held out Fica taxes. Employee withholding are done based on the W-4 form. The more deductions that are on the W-4 form he filled out the less tax will be withheld. If I knew the Gross amount and the payroll cycle (weekly, bi-weekly, semi-monthly, monthly) I can tell you're the correct amount of Federal Taxes. I cannot tell you your state as I only have the rates for Idaho.

It could make a difference on taxes if his payroll cycle changed. If he changed from Bi-weekly to weekly or from Semi-monthly to bi-weekly than the taxes will seem less because fewer hours are in each pay period.

If he wants the most held out claim Single and 0 deductions, or he can claim Married and 0 deduction. If he is claiming only himself he would claim Married and 1 deduction. If he is claiming you or children than he can claim one deduction for you and one for each child. If you are working he cannot claim a deduction for you and if you are claiming a deduction for a child he cannot also claim the same deduction.

Please if you have more questions let me know or if you wish to send me the gross amount and pay cycle I can figure your federal.

Shirley

Thanks for your reply.

His hourly wage is $48 and is paid for only the hours that he works for. No weekends and holidays are included. Since I am also working, he can't claim me as dependent.
He joined in March end and worked only for 7 days in March, but the tax amount deducted is low.

Currently his payroll cycle is monthly and we are in Connecticut State. At the time of joining we had filled and sent a W4 form to his employer by which an additional amount of $160 can be withheld from each paycheck. But the total federal tax that was withheld from his March Paycheck (For 7 days) was $161.36 and only 101.07 as state tax.

I put the same amount in different calculators available in internet and everything is showing that the tax withheld from his current paycheck is less. Kindly clarify.

Also we are expecting a baby very soon, your advice is required on when shall we send the next W4 form to our employers. Do both of us need to send w4 from to our employers, or only one need to send?

Thanks for helping us out.