What Is the Difference Between Single & Married Withholding?

When you’re single, the world is your oyster and you don’t have to worry about how your finances, including your taxes and tax withholding from your paychecks, affects anyone else. However, once you tie the knot, you and your spouse need to make sure you’re on the same page because what either of you do individually affects the other, and completing your Form W-4s to determine your income tax withholding is no different. Understanding the differences between single and married withholding will help you and your spouse plan appropriately for taxes so you don’t receive a nasty surprise when you file your return.

W-4 Filing Single Vs. Married

The information that your employer uses to calculate income tax withholding is the same for everyone: your income per pay period, your filing status and the number of withholding allowances you claim. Your employer already knows how much you make, but you must supply your employer with the remaining information by filing a Form W-4 with each company you work for. If you don’t complete and submit a Form W-4, the IRS requires the company to withhold money from your paycheck at the maximum rates, which are as if you were single and didn’t claim any withholding allowances.

When you’re married, the information your employer uses doesn’t change, but the information that you provide might. From determining how to allocate withholding allowances among your job and your spouse’s job to selecting the most applicable filing status for your situation, you and your spouse need to have a conversation to make sure you’re both on the same page. Otherwise, you could both end up claiming the same allowances, or not checking the right filing status.

Calculating Withholding Allowances

Each withholding allowance you claim reduces the amount of your paycheck subject to income tax withholding. For 2018, the amount of each allowance is $4,150 for the entire year, so you divide the number by the number of pay periods per year to find how much it will reduce your income subject to withholding each paycheck.

When you’re single, if you’re working one job, most taxpayers can simply fill out the Personal Allowances Worksheet to calculate the number of allowances you’re entitled to claim. If you’re planning to itemize your deductions or claim large adjustments to income, or if you have substantial income that isn’t subject to withholding, you can use the Deductions, Adjustments, and Additional Income Worksheet to more accurately calculate the withholding allowances you should claim.

However, when you’re married and both you and your spouse work, or if you work multiple jobs, you should calculate your withholding allowances using the Two-Earners/Multiple Jobs Worksheet. This worksheet helps you determine the total number of allowances the couple should claim across all of their income streams. The IRS suggests that overall withholding will be most accurate if you allocate all of your withholding allowances to the highest paying job and then claim zero on the remaining jobs.

For example, say you and your spouse complete the Two-Earners/Multiple Jobs Worksheet and are entitled to four withholding allowances. If you have the higher paying job, you should report the four withholding allowances on your Form W-4 and your spouse should report zero allowances on his or her Form W-4. If each spouse claims all of the withholding allowances the couple is entitled to claim, the couple will likely have far too little withheld for taxes during the year.

You aren’t required to claim all of the allowances you’re entitled to based on the worksheets, however. Some people simply like having extra withheld as a means of forced savings that they can’t dip into until after they file their tax return. Others have side income that makes them want to withhold additional taxes from their job so that they don’t have to make estimated tax payments during the year to make up the difference. If you do have additional income that isn’t subject to withholding, such as interest or investment income, consider requesting your employer withhold an additional amount each pay period to cover those taxes.

Impact of Filing Status on Withholding

When filling out your Form W-4, you also have to select your tax withholding filing status. For singles, you don’t have a choice, you’re stuck checking the “Single” box. But, if you’re married you have to weigh the differences between married vs. married at higher single rate when you’re filling out the form. The difference is that if you select the married option, your employer will withhold taxes from your paycheck based on the lower married filing jointly tax brackets, so you will have less withheld from your paycheck. If you plan to file your taxes jointly with your spouse, this option usually results in the most accurate tax withholding.

However, if you select the married but withhold at higher single rate option, your employer will calculate your tax withholding as if you were filing as a single person. This results in higher income tax withholding each paycheck. Consider this option if you’re married but plan to file taxes separately from your spouse, or if you prefer to receive a larger tax refund because you have more withheld throughout the year.

Improper Form W-4 Penalties

Abusing the system and claiming more allowances than you’re allowed or the wrong filing status on your Form W-4 can come back to bite you in multiple ways. First, too little income tax will be withheld from your paychecks, so you’ll have to write a check when you file your taxes, which by itself can be painful if you’re used to getting refunds. For example, say that you and your spouse complete the personal allowance worksheets and determine that together you’re entitled to three allowances. But, when you fill out your Form W-4s for each of your employers, you each claim all three allowances, resulting in too little being withheld overall.

Worse, you can face additional interest and penalties from the IRS if your withholding doesn’t meet the minimum requirement for the year. You always have to pay the difference if you haven’t had enough withheld, but you can avoid additional interest and penalties if you meet the minimums. One way to avoid interest and penalties is if your withholding totals at least 90 percent of your tax liability. For example, if you owe $7,000 in taxes, you won’t owe any interest or penalties if your withholding is at least $6,300.

Another way is to calculate your minimum withholding amount based on your prior year’s tax liability. If your adjusted gross income is $150,000 or under, you avoid interest and penalties if your withholding equals at least what you paid in taxes the prior year. So, if last year your adjusted gross income was $79,000 and your tax liability was $7,000, if your withholding this year totals $7,000 or more, you won’t be penalized no matter how much you owe, such as if somehow your income increases so substantially that you owe $70,000 in taxes for the current year.

If your adjusted gross income exceeds $150,000, however, your withholding must be at least 110 percent of what you paid in taxes the prior year to be safe from interest and penalties. So, if your adjusted gross income is $181,000 and you owed $14,000 in taxes, your withholding this year would need to be at least $15,400 to meet the minimum withholding requirement under this test. Even if you’re a high earner, you might still opt for this method because it offers the security of knowing how much needs to be withheld based on a fixed amount. If you shoot for 90 percent of what you anticipate owing, you could be thrown off if your income unexpectedly increases.

Finally, if you can’t provide a reasonable basis for the number of allowances or the filing status you claimed on your Form W-4, you could also face a civil penalty of up to $500. For example, if you claim 13 withholding allowances because you don’t like tax withholding, and don’t have a reasonable justification for reporting that on your Form W-4, you will likely be penalized.

Married vs. Single Tax Differences

The reason for the differences in the withholding formulas for married versus single employees is because the tax code contains important differences for how taxes are calculated based on your filing status. The most significant difference is in the tax brackets for the different filing statuses. After the Tax Cuts and Jobs Act took effect in 2018, the tax brackets are lower than prior years, but the differences between filing statuses remain significant.

For example, if you file your tax return as single, you pay the following tax rates:

• 10 percent on your first $9,525 of taxable income
  
• 12 percent on taxable income from $9,526 up to $38,700
• 22 percent on taxable income from $38,701 up to $82,500
• 24 percent on taxable income from $82,501 up to $157,500
• 32 percent on taxable income from $157,501 up to $200,000
• 35 percent on taxable income from $200,001 up to $500,000
• 37 percent on taxable income over $500,001

But, if you’re married filing jointly, the tax brackets are wider:

• 10 percent on your first $19,050 of taxable income
• 12 percent on taxable income from $19,051 up to $77,400
• 22 percent on taxable income from $77,401 up to $165,000
• 24 percent on taxable income from $165,001 up to $315,000
• 32 percent on taxable income from $315,001 up to $400,000
• 35 percent on taxable income from $400,001 up to $600,000
• 37 percent on taxable income over $600,001

If you’re married but opt to file separate returns, the tax brackets are exactly half of the tax brackets for joint filers:

• 10 percent on your first $9,525 of taxable income
• 12 percent on taxable income from $9,526 up to $38,700
• 22 percent on taxable income from $38,701 up to $82,500
• 24 percent on taxable income from $82,501 up to $157,500
• 32 percent on taxable income from $157,501 up to $200,000
• 35 percent on taxable income from $200,001 up to $300,000
• 37 percent on taxable income over $300,001

The tax brackets for joint filers are twice as large up as they are for single filers up to the 32 percent tax bracket, which means that most married couples pay less in taxes if they file jointly than if they weren’t married and each person filed their own return. In addition, the brackets for married taxpayers filing separately match the single filing status brackets through the 32 percent tax bracket as well.

As a result, if one spouse generates most of the taxable income, that couple could save a substantial amount of money on taxes by filing jointly. Because income tax withholding is designed to reflect the amount taxpayers will actually owe on their taxes, the tax withholding formulas include differences for married versus single taxpayers.