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

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

  1. Hi Pamela,
    Good question! I have no idea. You probably need to talk to you HR department and find out why they didn’t take the extra $50 out.

  2. Hello,
    When I filled out my W-4 for work, I put that I wanted $50 extra taken out each payday for state. When I look at my paystub, only $10 is being taken out. Where is the other $40 going?

  3. Hi D’Andre,
    You may want to change your exemptions to zero. Your income will be on top of your husbands – possibly kicking you into a higher tax bracket.

  4. Hi Krislynn,
    It sounds to me like when you changed your exemptions for the summer that HR didn’t make the adjustment. I think you should go to your HR department and talk with them. See what they say.

  5. Hi Dawn,
    the $1,000 you make a year isn’t going to have that much impact on your taxes. It probably does more for your mental health than anything. (I used to be a stay at home mom, you need that day!) If your husband is claiming one exemption, and you claim one exemption, you should be just fine. For what it’s worth, the tax on your $1000 of income is $150. That would be the tax over and above what your tax would be if you didn’t work.

  6. Hi Anne,
    I think you should keep withholding. If your husband is on track to make $100k this year, you will definitely have to pay more than $6,000 in tax. Doing a quick and dirty analysis – if you’ve paid $6600 for federal tax, and you’re married filing jointly without itemizing your deductions and with no kids, and $100,000 in income – then I’m showing that you’d still owe about $5,000.

    Now, if you have children and/or are itemizing deductions, then maybe you are all caught up for the year. But with an income of $100,000, I hate to see you cut your withholding all the way down to nothing. I would think for you, he should be at Married with 3 allowances. More if you have children. (one for each child and another one if the child is under 17.) Given that you’re ahead of the game now, I would look at what his current number of exemptions is, and maybe add two more. That way, you’re getting more in your paycheck, and a smaller refund.

  7. Hi Katrina,
    If you’re single with three children, working part time at minimum wage – then it makes sense that they are not taking any federal withholding out. At your income, you wouldn’t have any taxes that you owe. And – you can still qualify for a refund because of EIC and the refundable child tax credit.

    Now – here’s the but — are they taking out any social security or medicare? If they’re not doing that, then you’re a contract laborer and you’ll have to deal with paying self employment taxes. I don’t think that’s the case here, but I figured I should mention that, just in case.

  8. Hi Jackie,
    I disagree with your tax lady. I am assuming that you are in the United States and working on an H1 visa? In which case you will be taxed as a US resident and you pay tax on that income. I would claim one exemption. Definitely not exempt.
    Now, maybe you’re a student on an F or a J visa. Then you would be filing as a non-resident alien. Non-resident aliens are not allowed to write EXEMPT on line 7 of their W4. What I think your tax lady meant was that you were exempt from social security and medicare withholding. That’s different. You would still need to claim 1 exemption, but your employer would not be withholding SS and medicare.

  9. Hi Tim,
    No jail time for that. And yes, he can set up an installment agreement. The penalties basically are 1/2 of 1 percent per month of the late payment. So, if he paid $4500 on time, then penalties would only apply to the remaining $4500. There’s also interest, that runs about 3% annually but it’s compounded daily. An underpayment penalty may have been accessed – but that’s not a very big number it that depends upon how much his taxes were last year.
    I hope you talked him into adjusting his W4 for this year!

  10. Hi Sage,
    I think it all depends upon how much you make with your 1099 job. For you, I’m guessing that you want to withhold enough tax from the W2 job to also cover the 1099 job. But it’s hard to tell what that will be. My best recommendation is to go the the IRS withholding calculator and run the numbers through there, based upon your best guess of your income. Good luck!

  11. Hi Viege,
    As my Dad always used to say, “If it ain’t broke, don’t fix it.” If you’ve been claiming 3 allowances for 15 years and it’s worked just fine for you all these years, then you should keep doing what you’re doing.
    But – my only concern here is that you say you’re filing as head of household. If you don’t have a child – how are you getting away with filing as head of household? Do you have some other dependent?
    You might want to try the filing status tool

  12. Hi Gina,
    something isn’t making sense. I’m thinking either the taxes were computed wrong, or the withholding wasn’t right. You might want to talk to someone in person. I would think – given what you’re telling me, that 1 exemption would be enough. Maybe there’s more to the story that I don’t know?

  13. Hi John,
    Oh gosh, I think you could claim 11 and still be okay. There are 5 of you, the standard deduction and the exemptions alone will wipe out your taxable income. If your kids are under age 17 then you’ve got child tax credit coming and at $30,000 you’ll still qualify for some EIC.

  14. Hi Kelly,
    Ignore the worksheet. You’re going to claim single with 3 allowances. Since you are the custodial parent and you are not living together, you will be able to file as head of household (it’s a better tax rate.)

  15. Hi Heather,
    If his claiming 3 and you claiming one has been working, you might just want to stick with it. You can always wait until you get a few paychecks and then run the numbers through the IRS withholding calculator to double check. But I think you’re doing fine the way you are.

    Oh, and congratulations on the new job!

  16. Dear Mike D,
    Dear, dear, dear Mike D. You have what I call a perfect return! You owe $20. This is good! You did nothing wrong.

    Okay, I think you’ve got a perfect return, but you don’t. You wanted a refund. If you want some money back, claim 2 exemptions instead. I’m guessing that you had a second job? That was probably it.

    But for what it’s worth, owing $20 is a perfect return!

  17. Hi Allison,
    I’m with you. At $37K with 4 kids, by the time you take your standard deduction, exemptions and child tax credit, you’ve zeroed out your income tax and have money coming back. Claiming exempt I think is a bit dangerous in case you do wind up making a bonus or something. If claiming 11 exemptions leaves you with a big refund, I’d stick with the 11 exemptions. You’re not having much, if anything being withheld. The money you’re getting back is EIC and extra child tax credit anyway so it’s probably not making any difference in your take home pay. But I prefer the 11 exemptions to claiming “exempt”. It’s just a little safer in case you do wind up getting a huge bonus or something.

  18. Hi WDP,
    In your case I would claim “exempt”. They will still take out social security and medicare, but they won’t take out federal withholding taxes. To claim exempt, you just write the word “exempt” in box 7.

  19. Hi Mackenzie,
    Because of your incomes, you’re going to be kicked into a higher tax bracket. Plus you have your condo income. I’m thinking you should both withhold at the higher single rate with 1 exemption. Maybe one of you go to zero. That’s shooting from the hip. To get a more accurate result, take your pay stubs and your tax return as go the the IRS withholding calculator. That’s going to give you your best information.

  20. Hi April,
    my quick and dirty is to reduce the number of exemptions you claim by 1 for each $1000 of tax that you owe. (This is far from perfect, but it’s better than nothing.) For the best answer, use the IRS withholding calculator. But since you’ve already reduced your exemptions to zero, it’s your husband’s turn to reduce the number of exemptions he’s claiming.

    Or, if you don’t care who’s check is bigger, then take how much you owed before, divide it by the number of times you’ll get paid this year, and have that amount added as extra withholding on your W4.

  21. Hi Jennifer,
    the current W4 for working people has an extra dollar amount to withhold – like $5 or $10. Retired people often get W4s that have a percentage to take out. And although there is a “federal W4P” for retirement – most of the pension companies have their own W4s so they are all different.
    But the regular W4 – for a job has you claim a number of exemptions and there’s a box for extra withholding. Personally, for an extra summer job, I’d claim zero exemptions (which means more withholding than 1 exemption). That should cover her just fine.

  22. Hi Marisa,
    The best way to get an exact figure is to go to the IRS withholding calculator. That’s going to give you the most accurate figure to zero out your taxes. Generally, I’d claim 2 exemptions at one job and 0 exemptions (higher withholding) at the second job. But if you want to make sure you’re withholding enough, without taking out too much, go to the IRS withholding calculator. It will get you spot on.

  23. Hi Marlay,
    If you claim exempt, and have no money taken out of your paycheck, then you could get stuck with a big tax bill later. If you’re a full time student, if you parents still claim you on their return, then you have no exemption – so even more of your income is taxable. If your parents don’t claim you, then you’ll probably be able to write off $10,350 from income. So if you make less than that in a year, then you probably could claim exempt.

    But- you work 30 hours a week. Even if you only make minimum wage, that’s going to put you over the $10,350 exemption – so you will have taxable income.

    And remember, even if you claim exempt – they will still take social security and medicare out of your check. So for every $100 that you earn, they’re going to take $7.65 no matter what.

    Bottom line – you can pay your tax now, or you can pay it later.

  24. What if I am single, have one job, no kids, and still live at home with my parents and they can’t claim me anymore? What do I claim. Just myself? So a 1?

  25. I am a teacher and I am married and I have two kids. I get paid once a month but in the summer I teach summer school and instead of paying me twice they throw it in my normal paycheck and they take out an obscene amount of taxes, basically I worked summer school for free. I want all my money in the summer so I changed my exemptions to 8 but it did nothing. I still got the same amount I always get. I don’t understand. My husband works as well and he does make more money than I do and I think he claims 2. What should I do?

  26. Can you help me? Ok I will be grossing under 1k a year working one day a month. My spouse is grossing 45-50k a year. We have one child.

    Does the tax burden remain the same no matter how many witholdings you claim?

    I believe he claims “1” and I always claimed “1” and until our child was born we always had to pay out at the end of the year.

    Can you please tell me what to claim on both of our taxes, I will likely be putting “0” are we losing money or is the tax burden the same in the end?

    Also since we file jointly will my income be ate up by the taxes making it more expensive to work?

    Thank you

  27. Hi I have a question. My husband is the only one who works outside of the home. He works a commissioned base job, he is on track to make between 90-100k . He does earn an hourly wage as well. It is the month of May and he has already paid $6600 in federal taxes alone. When I go into the IRS withholding calculator it says we have already met our federal tax for the year, it says to redo a w-4 and claim 23 allowances to have nothing else taken out. Otherwise according to the IRS calculator we are on track to pay $21k in federal for the year with a refund of about 14k. I entered all the info from his most recent check and from our 2016 taxes. Does this sound right?… thanks for any info … I forgot to mention he started this job with commission in dec of last year, so we are new to this pay and what allowances to claim.

  28. Hi, Jan. I’ve been claiming 3 allowances on my w4 for over 15 years. I’m single, only have one job, no children and file as head of household. Reading alot of comments on how to claim allowances. I’ve never had any problems with the IRS, I always get a tax refund, very, very little but I get one. I was advised by my co worker to claim zero allowances, so I would get a larger refund. I’m comfortable and have been filing the same for years, i would really appreciate your expert advise. Thanks.

  29. Hello, i work two jobs one w2 and one 1099. i am unmarried and have one child and my girlfriend is a stay at home mother. im not sure how many allowances to put what do you think?

  30. Hello Jan,
    My name is Katrina. I am a single mother with 3 kids. I work a part time job that pays minimum wage. I am not getting any taxes taken out of my check BC I believe I filled my w4 out wrong. I need to know if you could tell me what to put on my w4 to get the least amount of taxes taken out of my check and still receive a tax refund.

  31. I am a pastor and do not file a W-4. My wife took two small part time jobs last year for the first time, making about $2400. I filed “exempt” for her on her W-4 because combined we would have no taxable income on line 43, 1040. Now, I’m thinking that this may not be right since we did have social security taxes and a total tax on line 63, 1040. What should she claim on this year’s W-4? Married, but withhold at higher single rate, 0 exemptions? Thanks so much!

  32. I’m need help I’m so confused.
    I’m moved here from Germany. I’m single. So my tax lady said I should claim exempt, I have nobody else claiming me as a dependent. I make about 24.000 a year. Does that sound right? I’m afraid I will owe taxes.
    She said since I’m exempt I don’t need to file taxes.
    Me being exempt gives me more money each month instead of a big amount at the end of the year. I like that, just don’t know if this is right.
    I really would appreciate your help.

  33. So my brother made 70k in 2016 but went exempt for the entire year and had no federal income tax witheld from his paychecks. Assume he will owe $9k. Once he files his return this year, can he call the IRS make a payment for half of $ owed and set up an installment agreement to repay the remainder of the debt including whatever penalties they may unleash on him? Also will he get jail time for doing this?

  34. I am married and have one child. I work and have a W4 filled out thru my company. My exemptions or claims (?)for 2016 shows to be 1. My husband owns his own business, makes less but pays taxes each year for what is owed on his taxable income after filing. In doing our taxes this year, solely based off my W2, I owe money. I am not sure how this is possible – why would enough not be withheld with only one exemption – our child???? To prevent owing large amount this year (just for me, not his business), I need to adjust to 0?

  35. Hello Jan!
    Thank you for your time,
    My wife and I are moving and only I will be working making about $30,000 a year. We have 3 children now and need to have enough in our check but also want a bit of refund to have a cushion next year. I’ve heard different numbers from 0-4 but obviously we want enough for our budget and also small refund. What would be best in your judgement? Thanks!

  36. I am married, but my husband and I are separated and living in different states. We have a 15 year old son together and he pays child support, since I am the custodial parent. (Although he hasnt paid and is behind in nearly $1000.)

    I dont know if he currently works.

    I do have to check “married” on the Personal Allowance sheet and if anything changes, I can modify that. Correct? I start working, this year, on April 3rd.

    Also, how many allowances should I claim if I want to have too little taken out of my paychecks, and yet want an income tax return at the end of the year and not pay taxes. (I will be making $10.50 an hour, full time, and only $27,500 a year in gross.)

    On the Personal Allowance Worksheet for B and C, what do I put specifically?

    Note: If we are still married by the end of this year, we will be filing as “married filing separately”, correct?

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