Thanks for this explanation - I had no idea there were different methods for withholding on bonuses. Do you know if I can specify which method I want them to use, or is that entirely up to my employer?

It's technically up to your employer which method they use, but many payroll departments will accommodate your preference if you ask nicely. The flat rate method is actually easier for them to administer anyway. If they won't change their method, your other option is to adjust your W-4 withholding around the time you know you'll receive a bonus. You could increase your allowances temporarily for that pay period to offset the overwithholding. Just remember to change it back afterward!

The blended or "effective" tax rate is just your total tax paid divided by your total income. So if you made $100,000 and paid $18,000 in federal income tax, your effective federal rate would be 18%. What confuses most people is that we have marginal tax brackets - different rates that apply to different portions of your income. Your first ~$12,950 is tax-free (standard deduction), then 10% on the next chunk, 12% on the next chunk, etc. Your highest marginal rate (the rate on your last dollar earned) might be 24%, but your overall effective rate will be much lower.

Can you explain more about how you calculated that extra withholding amount? I'm in a similar situation but not sure exactly how to figure out the right number for line 4(c). Do you just use last year's investment income or try to estimate the current year?

I look at our investment income from the previous year as a starting point. For example, if our 1099s showed $10,000 in investment income and we're in the 22% tax bracket, that's $2,200 in taxes. If I get paid bi-weekly (26 paychecks), I'd put about $85 extra on line 4(c). I actually use a slightly more complex approach now. I take our average investment income over the past 3 years to account for fluctuations. If we have an unusually good year, I might bump it up mid-year when I see how the investments are performing. You can update your W-4 anytime with your employer.

This is what we do! Our investments are too unpredictable to set a fixed withholding. We just make estimated payments using the 1040-ES form in the quarters when we have significant capital gains or dividends. It's much more accurate than trying to guess at the beginning of the year.

Thanks for the tip! I just checked WMR and it still says "Refund Approved" with the full amount and the same direct deposit date that's on my transcript. No mention of any adjustments or changes. Hoping that's another good sign!

That's definitely a good sign! In my experience, if both your transcript and WMR are showing the full amount with an approved status this close to your deposit date, you're very likely to receive the full refund. The system usually updates both if an offset is being processed.

This is true! Same thing happened to my brother. His refund got offset for state taxes but he called and argued that he was on a payment plan so they shouldn't have taken it. Took about 6 weeks but they sent him a check for the full offset amount.

Is there any way to do the Mega Backdoor Roth if your employer plan doesn't allow after-tax contributions? I've heard about using Solo 401ks but I'm not sure if that would work for someone with just a regular W-2 job and no side business.

Unfortunately, you need a 401k plan that specifically allows after-tax contributions (beyond the regular pre-tax or Roth 401k limits) to do the Mega Backdoor Roth. Without that plan feature, this strategy isn't available. If you have any self-employment income, even from a small side business or freelance work, you could potentially establish a Solo 401k with the right provisions. However, this only works with actual self-employment income - you can't use a Solo 401k for your W-2 income from your main employer.

This is my concern too. I feel like "tax-free forever" is too good to be true, especially as the government looks for more revenue. But at the same time, I'm not sure what alternative is better? Traditional accounts are definitely going to be taxed at withdrawal.

I'd definitely be interested in seeing that code! My Python skills are pretty basic but I can probably figure it out with some examples. Would it work for someone who's not a developer but can follow instructions?

Absolutely! It's actually pretty straightforward, even for Python beginners. The code is about 25 lines and mainly uses the camelot library which does most of the heavy lifting. You just need to install Python (if you don't already have it), then pip install camelot-py and pandas. I'll set up a simple version that works with the standard Workforce Intuit format and share it via DM. It basically loops through a folder of PDFs, extracts the tables, and outputs them to either CSV or Excel. You'll just need to point it to your folder of PDFs by changing one line in the code. I've documented it well with comments so you can see what each part does.

We tried that route and got a flat "no" - they said it was an enterprise-only feature and wanted an extra $5k per year to upgrade our whole account just for that functionality. Total ripoff.