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

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

  1. Hi Kaycee,
    That sounds good to me. You might even be able to get away with 5 exemptions. That’s because you get extra exemptions for claiming the child tax credit and the head of household filing status. That said, 3 should leave you with a refund. If your refund seems too large, then next year increase your exemptions.

  2. Hi Barbara,
    For less than $6,000 a year, she could claim exempt. BUT – I personally would recommend single zero. Why? Because too many times I’ve had kids wind up having to pay because they made more than they thought there were going to. And, most importantly for you, I find that the parents wind up paying the extra tax the kids owe. So Barbara, do yourself a favor and have her withhold at the Single with zero exemptions rate. Then, when she gets a refund, she’ll be really happy to have a little extra money just before spring break.

  3. Hi Betty,
    You’ve got two forms of income so it’s harder to figure what you’ll need to withhold. The first question would be – how much are you getting out of your 401(k)? The second question would be how much are you getting in social security? Plus, you’ve got wage income for the first half of the year also.

    You can go to the IRS withholding calculator, and get a pretty good answer. But you might not know what to input into the calculator since you’ve got so many changes. I would guess that you should claim 1. That’s really a guess. But if you’re completely lost, it’s a pretty safe one. If you wind up owing come April, change your withholding to zero. If things are looking okay, leave it at one for awhile.

  4. Hi Ann,
    So my question to you is – how are things looking so far? If your withholding is working out just fine – then don’t change it. Or, add one more dependent your husband’s w4. The reason I say to add the dependent to his W4 is that you’ll want the higher withholding on your paycheck – even if you wind up claiming your child because of your self-employment income.

    Now, about that student loan debt. I’m thinking you need to file separately to keep your monthly payment down, right? Usually, once you have children, your taxes are better filing together – but not always. But, to save $9,500 a year it’s worth filing separately.

    Good luck and congratulations on the pregnancy!

  5. How many Allowances should I be claiming?
    I am single not married have one fulltime job & one dependent.

    My paystubs currently show 3 dependents and I am not sure why or if that is even right?

  6. Hi, my daughter is 21, a full-time college student and I claim her as a dependent on our tax return. She is starting a part-time job, has no unearned income, and will be making less than 6,000 this year. Is she exempt or Single-0 allowances? Thank you.

  7. I just retired a month ago and am trying to fill out my W4 for withdrawl for pension payments. Gross pension payment per month is $619. I am single with no dependents. Should I claim 1 or 0 on my W-4?
    I also will be receiving a payment from my 401k and will need to pay taxes on that income. What is the best way to do this? Can I have tax taken out beforehand? If so, how?

  8. Hi I have a slightly confusing situation. My husband and I file married filing separately due to an overwhelming amount of student loan debt that I have (have to file separately to stay on my IBR plan or pay $9500 a year which we can’t really do). We both work and our salaries are similar. Right now I claim 1 and he claims 0. I am due with our first child in November. I also own a small direct sales business where I’ll have about 7,000 in income. So my question is should I be claiming something else? One of us will have to claim the child on 2017 taxes and I’m thinking with my business income since mine will be higher it should be me, but I’m unsure. Should one of us change our withholdings? Also should one of us mark Married, but withhold at higher Single rate on our W4?

    Sorry if that is confusing. Thank you!

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