Claiming Exemptions—the W-4 for Dummies

w4 for dummies

 


I’ve been getting a lot of questions about how many exemptions to claim on the W-4 (Employee’s Withholding Allowance Certificate) form that you give to your employer.  People look at the whole 2 page form and get intimidated.  For most people—you should just ignore the rest and concentrate on the little part at the bottom of page one.  That’s the part in this screen shot up above.   It will make your life a whole lot easier.

 

First, some questions:

 

I claimed the wrong number of exemptions on my W-4 and now its tax time and I’m going to claim a different number of exemptions.  Will I get in trouble for this?


No you won’t.  Your employer doesn’t report you to the IRS for not claiming the right amount of allowances.  The worst that will happen is that you owe a lot at tax time or get a big refund.  (Actually I don’t think of getting a big refund as being a bad thing.  Probably shouldn’t call it a “worst case scenario.”)  Neither of those things are crimes.  It’s possible that the IRS could inform your employer to increase your withholding if the withholding on your W2 is not enough to cover your tax liability.  I have never seen that happen to anyone—but the IRS is allowed to do that if they think it’s necessary.

 

I don’t want any tax taken out of my paycheck.  Can I just claim EXEMPT?

 

No you can’t.  Exempt is only for people who will have no tax liability at all.  You might have gotten a refund last year, but it doesn’t mean you have no tax liability.  Generally, someone with no tax liability makes less than $5,950 for the entire year.    For most people, claiming EXEMPT is a really bad idea.

 

Okay, so what should I claim? Good question.  Here’s my suggestion list.  See what category fits your best.

 

You are a student, either in high school or in college.  You’re not married and you don’t have kids.  Your parents are allowed to claim you on their tax return (you’re under 24 years old.)  SINGLE, ZERO ALLOWANCES


You’ve got a job, only one job, you’re living on your own, and you’re single.  SINGLE, ONE ALLOWANCE


Now if you have a child, add another allowance for each child.  For example, let’s say you’re single with 2 kids, you’d claim single 3 allowances; one allowance for you and one for each of the children.

 

Single like above but you’re working two different jobs, SINGLE, ZERO ALLOWANCES – because the two jobs kick you into a higher tax bracket than the withholding would show.

 

You’re married and only one person works:  MARRIED, TWO ALLOWANCES


You’re married and you both work—you’ll each have your own W-4 and they will be different

 

Spouse #1 with higher paying job—claim MARRIED and all the allowances for the family

 

Spouse #2 with the lower paying job—claim MARRIED BUT WITHHOLD AT HIGHER SINGLE RATE, ZERO ALLOWANCES


Now this is a pretty simplified guide, but it’s much easier to understand than what is on the form.  I also find that people are less likely to get into tax trouble with my rules than when you follow the allowances worksheet.

 

If you want a really good, accurate calculator to figure your proper withholding, the IRS has one on their website.  The problem is, as I’m posting this—the calculator is down.    You can use this guide for now and you can always tweak your withholding later when it’s back up.  Here’s the link:  http://www.irs.gov/Individuals/IRS-Withholding-Calculator

270 thoughts on “Claiming Exemptions—the W-4 for Dummies

  1. I need some advice. I claim two exemption on my w4 form. Every year I receive a huge refund of about 7500 dollars, however this year i will be making around 8,000 dollars more that will be tax free. What should I do to ensure that I do not have to pay any taxes and receive a refund.

  2. Hi Cheryl,
    If you’re going to receive $8000 in tax free income–then there’s nothing you need to do because tax free income won’t change your income tax return.
    If you’re getting $8000 of taxable income, let’s say you’re in the 25% tax bracket, then the IRS will take $2000 – you’ll still have a pretty hefty refund coming keeping things as they are.
    And worse case scenario–that $8000 is self employment income, let’s assume that’s taxed at 40% – well then you’re still only looking at $3200 in taxes and you’ve still got a decent refund so I’m not too concerned about it.
    I’m guessing that you’ve got some EIC going in your refund, that usually accounts for the large refund amounts. So the $8000 could affect the EIC. You might want to talk to a local preparer and get some numbers on paper to see what’s really going to happen.

  3. Hi I’m a college student and I’m still trying to figure out if I should exempt myself from withholding all my taxes for the year. I’m working basically full time only for the summer but when I go back to school I’m going to be working a lot less. Would it be more beneficial to exempt from withholding my taxes or claim one allowance and have the taxes taken out and get a tax return at the end of the year ?

  4. Hi Jennifwr,
    Personally, I think you should claim zero exemptions – which is different from saying you’re “exempt” from taxes. My guess is that your parents will claim you on their tax return. If you make over $6,300, then you’ll have taxable income. (If you’ll make less than that for the year, then my all means you can still be “exempt”.
    Money now versus money later? It’s a personal decision. I like money now. But it’s nice to get a little refund too–but it’s your choice.

  5. Hi,
    I am a single parent that claims head of household. I have been trying to get a full paycheck for a couple months so I can get back on track due to medical bills. I claimed 20 exemptions one month and only got $150 more than normal. This month I claimed 60 exemptions and got $225 more. Is it wise to claim 100 exemptions to receive a full check for one month? I do get a hefty refund but am trying to lower my debt now. I hope this makes sense. Thanks for your help.

  6. Hi, I have a question, where I am being laid off from my job in a week, in which my last check and all my PTO will be around $4600; I’m single, with 2 listed on my w-2; I want to know can I file exempt before that day comes; to where i won’t get tax that much by the fed on my last check; what are my scenarios i’m looking at;

  7. HI, I’m a college student and i am in the work study program. I did not file a new w4 this year, and just found out that i have had taxes taken out of my checks since February as result. I was unaware that the W4 had to be turned in every year. Is there anyway to be reimbursed for what I was taxed, because I should be exempt? Work study is my only form of income.

  8. I have never been married, head of house, full time job, part time job, 1 kid starting college and living at home, another kid not in college this year….just working taking a year off.
    What should I claim???

  9. Hi Laura,
    Interesting question. Frankly, I don’t think claiming 100 exemptions will get you any more money than 60.
    First, and most importantly, you will never get a “full” paycheck. No matter how many exemptions you claim, there will always be social security and medicare taxes taken out. So, let’s say you make $1,000 per pay check every week. Even if there is no federal withholding, there will still be $62 taken out for Social Security and $14.50 for Medicare. Also, there may be state tax in there as well. So you need to account for that too.
    Now, the quick and dirty method to figure how many exemptions you need to zero out your federal withholding is to take your weekly pay and divide by $76.90. (I know, sounds nutty but that’s how the tax tables work.)
    So lets say you made $100,000 a year. That’s $1923 a week. If you divide that by 76.90 you get 25. You’d need 25 exemptions to zero out your federal withholding.
    Now if you’re making that kind of money, and you don’t withhold–you’re going to get hit with a pretty major tax bill come April. So, if you’re doing this, make sure it’s temporary. Otherwise you just exchanging one type of debt for another.
    Good luck.

  10. Hi Charles J,
    Don’t claim “exempt” because technically that’s not legal. Read the post above that I wrote to Laura. You can up your exemptions to have less taken out, but don’t claim that you’re “exempt” because you’re not.

  11. Hi Brianna,
    Once your employer has withheld and paid those taxes to the IRS, they can’t get it back. So the only way you get your money back is filing a tax return and claiming a refund.

  12. Hi Angela,
    It depends. But my best guess is that you would claim 4-but that’s shooting from the hip. One for you, one for claiming head of household, one for the kid in college, and the fourth because you should get a nice tax credit for the kid in college. I’m guessing you’ll get nothing for the adult child not in college.
    That said, the IRS withholding calculator is a great tool and can fine tune that number better than I can. If you receive EIC, you could probably claim another exemption. If your stay at home child has no income, that might make for another exemption also. If the college kid is on 100% scholarship–I wouldn’t take the extra exemption for the college tax credit.
    I hope that helps a little anyway.

  13. Hi! I’m a single mother of 2, head of household what’s the smartest number for me to claim right now I just claim 1, but what would be the smartest move to make, I claim 1 because I want more on my check, and last year I still got a great refund, I just want to be sure Im making the right and best choice. So which would be smartst for a single mother with 2 dependents?

  14. Hello,

    When I started my job and filled out the W4 I was a single mother with two dependents. (One a child and one a parent). I got married this year and my spouse works. I need to change my status and allowances (currently single and 6 allowances) to reflect the change. My husband is filed as married and zero allowances. When looking at the W4 I am eligible for 4 exemptions until I use the working spouse part which encourages me to file married with zero exemptions. I was wondering what I needed to file as, and if I ended up changing mine to married and zero allowances how big an effect that would have on the paycheck I make (I’m paid monthly).

  15. Hello I had a question about putting exempt on a W4 Form for a job. I completed and I put an exemption on it. I am a Full Time student and I am a dependent for my father and this will be my first job. I have not filed taxes before, I was wondering I did right by putting down exempt on the form. Or if I could change it later. Also would it affect my being a dependent for my father next year?

  16. I am single, never married and have an 8 yr old. I have been claiming 3 on my State of Georgia . Just received an email that the state of Georgia witholding tax requirements changed in 2013. Not sure what to claim now, Head of House Hold or Single. I don’t want my take home pay to change too drastically less and I LOVE getting a refund yearly. Should I claim Head of Household on my W4 or Single with along with my son. So should I claim 2 or 3 as total allowance and can I do either? It states that Single and Head of Hosuehold maximum allowance is 1, what about my child?

  17. Hi Sydney,
    It’s hard to say what would be the smartest thing to do. Mostly, the issue is what works best for you? That said, if you only have one job, you could probably claim 3 exemptions pretty easily. Just remember, that each exemption reduces your refund a bit.
    So, what’s good for you? More money in your paycheck or more money in a refund? It’s not a smart versus dumb, it’s a which choice makes you happier?

  18. Hi Renae, I’m thinking that married with zero exemptions sounds about right. But you can try the IRS withholding calculator. You’re a good candidate for that.
    Switching to married with zero exemptions will definitely reduce your take home pay.

  19. Hi Denisse,
    It’s probably fine for you to put “exempt” on your W4. If you’re going to make over $5,000, then I’d change it to Single with zero exemptions, But if this is just a part time, job for school, I think you’ll still be fine with exempt. Since you are a full time student, this will not affect your father being able to claim you on his taxes.

  20. Hi Felicia,
    I went to the Georgia website to check out their withholding rules. I think you’re find claiming 2 exemptions. You can claim 1 for your self-filing as head of household. And another for your child. That makes sense. That totals two. I suspect that you probably have more deductions that can be claimed in Georgia, that’s why you’ve been able to claim 3 with no problem. But, if you’re worried, claim 2 for Georgia (but I’d stick with 3 on the federal.)

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