A reader wants to know how to set income tax withholding on a new job to avoid a tax bill in April.

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Question: I am 73 years old and drawing Social Security. But I’ve gone back to work to help pay off some debts. I will make $11.90 an hour and wondered how much I should have them keep out for federal and state taxes, so I won’t have to pay at the end of the year.Joan in Missouri

Jacob Dayan from Community Tax explains how to set tax withholding when you start a new job…

On your first day of the new job, your employer should have had you fill out a form W-4 that determines how much federal and state taxes are withheld from each paycheck to cover taxes. The form can be complicated, but from what you are saying, I recommend you enter “1” as the number of exemptions. This should ensure the IRS withholds an adequate amount to prevent you from owing any tax when you file a return. It’s better to be conservative in the first year of a job change to protect yourself from owing tax when you file. If, after filing your 2019 return, you receive too large of a refund, you can always ask your employer to amend your W-4 form. This will increase your number of exemptions, so less is taken from each check.

How to factor in your Social Security income

It may also be wise to estimate how much you plan to earn from this new job in 2019, because you will need to earn a significant amount to have a tax return filing requirement at all.  Assuming your only other income is Social Security, you do not have to file a return at all if 50% of your Social Security benefits plus all other income is less than $25,000.  For example, if your Social Security benefits are $1,250 per month ($15,000 per year), then you need to earn $17,500 at your new job before you have any requirement to file a tax return.  Though if taxes are withheld you may want to file to claim a refund of your withholdings even if you file below the filing requirement.

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Bottom line: Be conservative

Ultimately, I think you should claim one exemption on your W-4 form with your new employer, then review your total income and federal withholding when 2019 W-2 and 1099-SSA forms are issued in January 2020. Then you can determine if you need to file and/or make any adjustments to your federal income tax withholdings.

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About the Author

Jacob Dayan

Jacob Dayan

Jacob Dayan was born and raised in Chicago and worked in New York City as a financial analyst at Bear Stearns. In 2009, he returned to Chicago to be with his family and pursue a career assisting consumers and small businesses with various financial needs. In 2010, he co-founded Community Tax LLC, a full-service tax company helping customers nationwide with all of their tax resolution, tax preparation, bookkeeping, and accounting needs. He’s a licensed attorney in Illinois who graduated Magna Cum Laude from Mitchell Hamline School of Law and has worked with more than 60,000 clients – resolving more than $400 million in tax liabilities.

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