Tax Witholdings

[dang]

What's the best way to go about being sure that you aren't overpaying taxes from your salary? I think I might be having more deducted than needs to be. HELP! I want my $ now!

[hegemony]

the irs has a w-4 worksheet you can use with a pen or pencil. They also have an online calculator:

 

http://www.irs.gov/individuals/article/0,,id=96196,00.html

[Operation_Home_Ownership]

I am in the same boat.

I put '02' on my W4 and that has worked perfectly for me

For the last couple years, when filing the govt says I owe anywhere from $20-50 initially, but once I put in my deductions, they owe ME $100 or so bucks. I too like keeping more of my $$$ throughout the year, and getting a large refund just reads as lame money management in my eyes.

[squirrelgirl]

I used to claim one and owe less than $100 a year when I was single. I also had no real deductions and didn't make a lot of money though

[dang]

Hege,

 

I'll play with that when I get home--also I'll try to learn wth most of this stuff means.

 

SG, this 'claim one' means putting 1 on that w4 form thing, right? I dunno why I have difficutly with this...I suppose not sitting down and trying to understand it for sure has something to do with that...I'll get on that this evening.

 

Thanks for the nudges folks!

[squirrelgirl]

Hege,

 

I'll play with that when I get home--also I'll try to learn wth most of this stuff means.

 

SG, this 'claim one' means putting 1 on that w4 form thing, right? I dunno why I have difficutly with this...I suppose not sitting down and trying to understand it for sure has something to do with that...I'll get on that this evening.

 

Thanks for the nudges folks!

 

Yes. Claim one exemption. The smaller the number, the less tax wittheld. Are you at the same job making roughly the same amount of money as last year?

[dang]

Yes, same place about the same amount, but increased 401k contributions and have HSA now too.

[Operation_Home_Ownership]

Yes. Claim one exemption. The smaller the number, the less tax wittheld. Are you at the same job making roughly the same amount of money as last year?

 

I think it is the other way around, the smaller the number the MORE taxes are witheld. 0 would be allowing the govt the max, 1 & up the govt takes less & less, because you are claiming to be taking care of more responsibilities throughout the year.

[squirrelgirl]

Yes. Claim one exemption. The smaller the number, the less tax wittheld. Are you at the same job making roughly the same amount of money as last year?

 

I think it is the other way around, the smaller the number the MORE taxes are witheld. 0 would be allowing the govt the max, 1 & up the govt takes less & less, because you are claiming to be taking care of more responsibilities throughout the year.

 

 

You are right.

 

MORE taxes withheld (meaning bigger refund) if you claim fewer exemptions.

[Kevin20]

Hege,

 

I'll play with that when I get home--also I'll try to learn wth most of this stuff means.

 

SG, this 'claim one' means putting 1 on that w4 form thing, right? I dunno why I have difficutly with this...I suppose not sitting down and trying to understand it for sure has something to do with that...I'll get on that this evening.

 

 

Dang, thank of it this way. The IRS is so incredibly generous as to say, "Hey, it takes SOME amount of money just to feed yourself and not starve to death, so we won't tax that. In fact, for each human being with a mouth to feed that's covered on this tax return, we'll let you have $3500 of income per person without that being taxed. That bit of income is exempt from taxes"

 

So, exemption = a hungry mouth to feed. The more exemptions you claim, the more real or imaginary hungry mouths-to-feed, so the more income the IRS let's you have tax-free.

 

The more income you have that is untaxed, the lower your tax withheld on each pay check, right? So, claiming 2 exemptions leaves more money in your pocket than only claiming one.

 

The whole point of the W-4 form is to count up how many exemptions you have (or want to pretend you have), so that your payroll knows how much tax to withhold from your paycheck (for the advanced class, the W-4 also includes a worksheet to account for the deductions you expect, like, if you know you're going to put $12,000 into your 401k, you can account for that also, so as to lower your withholdings accordingly).

[Seabee]

I think it's important to note that exemptions are not reported on your W4; allowances are. Allowances often do not equal exemptions. There is a simple form on the W4 which lets you roughly calculate how many allowances to claim, or you can use one of the online calculators.

 

I personally keep a spreadsheet which adds my total YTD income with my expected income through the end of the year, does the same for tax withholding, and compares my projected tax liability to my projected withholding. This way I can account for things like interest and self-employment income and make adjustment to my W4.