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

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

  1. Hi Anna,
    Okay so you’re going to withhold at the married rate. I’m going to assume that your husband had some withholding while he was working. So you want to claim 1 for yourself, and 1 for him. There’s a part where you could claim another 1 for being married with him not having a job – but let’s skip that just to give you a little wiggle room.
    You’ll claim 1 more for the baby. Claim 2 more for the child tax credit. That’s 5 exemptions altogether. You might actually get away with claiming more, but I’d rather be safe than sorry. You can always try the IRS withholding calculator, they can figure it to the penny, but I’m thinking 5 should be good.

  2. Hi Jan, I’m trying to maximize my monthly take home pay and am not sure how much to withold. My boyfriend and I will be married by the end of the year, and had a child this year. I work full time; he worked for a few months of 2017, but is now a college student, so I fully support him and my daughter. Thanks!

  3. Hi Jacqueline,
    I’m sorry about your separation.
    I’ve got a couple of questions for you about your withholding. First – do you have any children? I’m guessing that you do because you want to claim 5 allowances. If you do not have any children, do not claim 5 allowances. Claim single and 1.
    When will the divorce go through? Do you think you will be divorced before December 31st? If yes, then you will file your tax return as if you were single for the entire year. If not, then you will need to either file jointly (probably a bad idea since there’s probably a good reason for divorcing him) or married filing separately – which is the worst tax filing status. So – that’s why I say claim single and 1 exemption only.

    But what if you do have children? Be prepared for all the crap (sorry but I do mean crap) over who’s claiming who. This puts you back at single and 1 just to cover your backside.
    If you moved out before July 31st, and you have children living with you, you may be able to claim the head of household filing status. If you moved out August 1st or later, then you can’t. If you let him move back in with you for even a day after August 1st – technically you can’t file head of household.

    I had a client who was estranged from his wife, but she still lived in his house. He had custody of the kids and wanted to claim head of household filing status. The divorce wasn’t final, but since his wife was living with him, I had to file him as married filing separately. “But we’re not having sex!” he protested. The IRS doesn’t know and doesn’t care. All they see is that they lived at the same address. I’m just putting that out there so that you see all the weird stuff that goes with taxes and divorce. Here’s a post you should read: Filing Taxes While Going Through a Divorce

    Good luck!

  4. Hi Mina,
    Hmmm, you’re in an interesting situation. And it all sort of depends upon how how parents and your incomes work out at the end of the year. So – I’m going to go with the most conservative solution – claim married – but withhold at the higher single rate, with zero exemptions. Here’s why:

    You’re only 23. If you do not turn 24 before the end of the year, and you’re still in college – it might make a whole lot of sense for your parents to still claim you on their tax return, even though you’re married. If that’s the case, you might need to file as married filing separately which is the highest tax bracket. So – do the withholding just to cover your backside.

    Now I can almost hear what you’re thinking, “Why should I pay higher taxes for my parents to claim me if I don’t have to?” At least, that’s what everybody else in your situation asks. The answer is – because a couple of dollars to you, versus thousands of dollars to them can be a very big deal!

    But it might not be thousands to them. Different families have different tax scenarios. That’s why you and your parents will need to talk come tax time so see what’s the best for both of you. It sounds like you and your parents are a loving family and you all want to do what’s best for the whole family, so it’s all good.

  5. Me and my husband are separated and not living together. I’m filing for divorce. I want to change my w4 to 5 allowances. Do I check the so for box or the married box

  6. I’m sorry, adding onto that, do I qualify for exempt status? I’m filling out forms before my first day of work and this has been driving me crazy. Thank you!

  7. My husband and I are still both university students. I haven’t been employed since 2015. My husband has never been employed. I receive scholarships every quarter from school and my mom filed me as dependent in 2016 (I’m 23 yrs old). Do I put down married and 0 allowances?

  8. Hi Elissa,
    since you’re married with a working spouse, you’re probably better off claiming “married but withhold at the higher single rate” with zero exemptions. In your situation, every dollar that you make will be taxed at your highest tax bracket. If you wind up with a big refund, then I’d increase your exemptions in 2018.

  9. I am a married, working mother with two children. Our joint income is about $109,000. One of my children has child care and the other doesn’t. Both are under 4 years old. Should I claim 4 exemptions or 0 or 1?

  10. Hi Sasha,
    Congratulations!
    Okay, tax stuff. I wouldn’t write exempt – but maybe claim like 15 exemptions while on maternity leave. It will have the same effect – they’ll only take social security and medicare but no federal withholding – but for some reason I just feel a little more comfortable with that. (My little anal retentive accountant paranoia showing.)

    But this is even more important for you: why would you and your husband file separately? Does one of you owe back taxes or have student loan debt? If that’s the situation, then I recommend filing an injured spouse claim.

    What you can’t do is have one of you claim head of household and get EIC if you’re married and living together. That would be fraud and you don’t want to go there. Married filing separate is the worst tax bracket ever! (Okay, it doesn’t hurt some people, but most people it’s a bad tax bracket.)

    So do yourself a favor, make sure you have a professional at least review your taxes before filing and see if there’s anyway to maximize your refund (or minimize what you owe.)

    But back to your W4 – your extra child should reduce your taxes by at least $1000 – so, I think you would be okay not having any withholding taken out of your maternity leave income.

    Good luck and have fun with your new baby!

  11. I am about to go on Maternity leave. I don’t get FMLA, but I do qualify for STD. I want to file tax exempt so that I’ll have enough to pay for my bills while i’m out since the company will only pay about 60% to 70% of my income. Should I file tax exempt being that when I return back t work I would add it back, and I’ll be claiming 2 kids and a house when I do file for taxes. I am married, but we will be filing separate when it’s time to file.

  12. Hi Shelly,
    you might want to put withhold at the higher single rate if you don’t have any children or other deductions. Otherwise you’re probably okay.

  13. Hi, I need your help! I just started working part-time and had to fill out the W-4. I put zero on allowances and married on filing status. I was wondering if I filled it out correctly? My husband is in the military and makes more than I do. Should I have chosen “married but withhold at higher single rate? Thanks

  14. Hi Brian,
    Wow, that’s an excellent question I’ve had my head buried in payroll tax stuff all day long. I do this stuff for a living and it seems so obvious to me. And then BAM! It’s not obvious at all.
    So here’s the answer: when they say Federal income tax withheld – that does NOT include you social security and medicare withholding. Ideally, your paycheck should list it all out. So let’s say your paycheck is for $500, then $31 should come out for social security and $7.25 should come out for medicare. Your federal income tax withholding should say “federal income tax” with the amount that you withheld. (Withholding is different for different people, that’s why I don’t put a number there.)

    Thanks again for the question.

  15. On this IRS tax calculator, it only asks for Federal Income Tax withheld. Does that mean all the fed tax including income tax and FICA (SS tax and medicare)?

  16. it’s rebecca again, thanks so much for your time and help, my husband said i was being taking advantage of and i agree. with all that’s going on i need a job, a friend of my husband who is a accountant referred him to the dept of labor. i have been so scared to say anything because we needed the money. but it’s gotten worst along with working 60 hours only having 30 claimed he is hurting my future income, but for the last 3 weeks he has held my pay until the next week or so saying he don’t have money to pay me. my husband also confirmed the pay you came up with before i contacted you and he was right on within a few cents of your calculations. that’s all i needed along with advice about dept of labor. thanks again for your help.

  17. Hi Marilyn,
    I honestly don’t know. You’ve got pension income in addition to your job. If you really want to have a zero dollar return, your best bet is to use the IRS withholding calculator. That’s what it does, compute your withholding so that you have a zero dollar refund.

  18. Hi Michelle,
    My first question for you is – do you have income besides your wages? Like, do you have investment income, or retirement money, or some self employment? Because if you have other income, that’s going to make a difference and the withholding won’t be right if you don’t take that into account.

    What I mean is – lets say you figured out your withholding perfectly for your wage income. Perfect! But you own a rental property that gives you an extra $10,000 of income a year. Well – you’ll still owe because you need to pay tax on that $10,000 and your withholding doesn’t account for that.

    Quite frankly, I think you should use the IRS withholding calculator. That’s going to be your best bet. But I’m also going to give you my “simplified” plan that I think you should use. I believe the IRS withholding calculator is better, but I know that some people will just never even try it. So, here’ my alternate plan.

    Who makes the most money? Is it you or your husband? The one who makes the most is going to claim 2 allowances in box 5. All that stuff at the top half of the page – ignore! Go down to box 5 and claim 2. In box 3 check married.

    The other one will go to box 5 and claim 0. In box three you’ll claim “married but withhold at the higher single rate”.

    Now, you’re halfway through the year, so you could still wind up owing. So you may want to withhold more because you probably haven’t been withholding enough.

    If this has been a problem for you for several years, maybe it’s time to spend the money and see a tax professional to help. I don’t know enough about your situation, but you could have alternative minimum tax – that messes these calculations up. Or there could be something else too. But my gut says that what you probably need to do is have at least one of you withhold at the higher single rate and that should help.

  19. Hi Jan,
    I’m was retired and have a public pension. I’m now working part-time. I prefer not to get a refund. On my W-4, I claim 0. What should I be claiming.

  20. Please help! How does my husband and myself fill out a W4? We file as married filing jointly and yet every year, going on many years we always owe! I am at wits end! I am very confused as to how any of this works. Over the years we have tweaked it and have have additional money taken out. We both now give an extra $10 to state and $15 to federal. I just don’t know what to do. Can you help me? Maybe give me a line by line example for both of us? Thank you so much 🙂

  21. Hi Maria,
    Just because you are married doesn’t mean that your withholding needs to be for a married person. The W4 is only to determine how much tax to take out of your check, nothing more. So if your W4 says single – that’s not a case of you lying to the government or anything like that. It only means that you are taking more money out of your paycheck to cover your taxes. If you always owe, then it might be a good idea to keep withholding at the higher single rate. That means that your boss will take out more money to cover your income tax.

    Now, when it comes to things like your company health insurance – then you need to make sure they know you are married so that you qualify for the right coverage. You don’t want to lie about that. But the W4 is just a guide for how much tax to withhold – nothing more.

  22. Hi Nate,
    I normally don’t give specific answers with numbers in them in my blog. Numbers are how I make my living so I normally would have you pay me to be that specific. But I’m going to use your question as an example because you have a very unique situation.

    Nate’s issue here is that he’s got two different types of income, and it doesn’t quite work when you go to the IRS withholding calculator. Nate has pension income – and he’s got social security income. The social security throws everything off here.

    You see, social security may or may not be taxable. If you don’t make a lot of other money – social security isn’t taxable at all. If you make a lot of money, 85% of your social security is taxable. And, if you’re somewhere in between, like Nate is, there’s a formula for figuring it all out. And it’s not the easiest thing to do by hand.

    There’s also the fact that since Nate is retired, I’m guessing that he’s over 65 years old – and that makes his standard deduction higher than a younger person.

    In a case like Nate’s, the best thing to do is to just plug the numbers into a tax program. I just used the 1040.com program that’s run right through my website. You can log in a play with your tax return for free. You don’t pay unless you actually file a return. Here’s a link to that:
    Do Your Own Taxes

    Now when I throw Nate’s numbers in there, I see that only about $4200 of his social security is going to get taxed. And if he didn’t have any other income or deductions, he’d pay a little under $1700 in Federal income taxes for the year. So if we want to figure out how much per month he should be withholding, we’re looking at $141.

    Now if Nate could just say, “Hey, take $141 out of my pension per month,” that would be the easiest thing to do. But what happens is we’re handed those W4 forms and we don’t always get that choice. The form says, how many exemptions do you want to claim. But how do you know how much they take out for an exemption?

    The answer is IRS PUB 15. Which I honestly don’t expect anyone to go look at, but here’s a link just in case: Pub. 15

    In Nate’s case, he’s getting his pension of $1803 every month. So if we go to page 59 in the IRS PUB, it tells us that if Nate claims zero exemptions they will withhold $205. That’s too much. If Nate claims 1 exemption, they will withhold $155, that’s still too much. If Nate claims 2 exemptions, they will withhold $104, and now that’s not enough.

    So if Nate wants to have $141 taken out of each check, then he would claim 2 exemptions on line 5 and request that they withhold an additional $36 per month on line 6.

    This is my biggest complaint with the W4 form. In a case like Nate’s, it’s much easier to just figure out what his tax will be and say, “Let’s withhold X amount of dollars.” But the W4 doesn’t really allow for that. And most people are not comfortable going through the IRS withholding tables to figure it out.

    Thank you Nate, for being my test case on this. I’m sure you weren’t expecting this to be such a complicated, drawn out explanation.

  23. Hi pla help my employer been saying im single in federal but im married i will change it tmorow but my question is can i still fet a tax refund for that and also we always pay every year thanks a lot

  24. Hi, I’m retired and make $45,211 a year, $1,965 monthly from SS and $1,803 from my pension. I’m looking to achieve a push with Uncle Sam. I want to cover my pension thru SS. What do i need to claim in dependents and how much additional should I withhold to cover my pension? Thanks very much.

  25. Hi Ann,
    I’m curious as to what state you live in. I’m here in Missouri and we don’t deduct unemployment tax, the employer has to pay all of it.

    If all of your employees want to be “exempt” then they would write “exempt” on line 7 of their W4. Your software should have a box or something that you check for that.

    But to double check to make sure it’s right, before you print the checks just check the math. Take the gross pay and times it by .062 for the social security. And multiply it by .0145 to get the medicare. Subtract those numbers (and whatever you need to withhold for the unemployment tax) and that should be the take home pay.

  26. Hi Alan,
    Congratulations on your marriage. With you being married, your joint income phases you out of the child tax credit. If you claim married with 3 exemptions, your wife should claim single with zero exemptions. That should bring you close to zero. You might want to only claim 2 exemptions to make sure you don’t owe.
    Now, since you’ve both been working up to this time, your withholding may be a little funky already, so you might want to go the the IRS withholding calculator and see what it suggests to get you through the rest of the year. Then you can change again in January to adjust for the full year.

  27. Hi Daniel,
    Here’s the standard accountant answer: Maybe.

    Sorry, but that’s as good as it gets. Does your daughter live with you? If yes, then you’re probably allowed to claim head of household, so that would be an extra exemption.

    Is she under 17? Then that’s probably going to qualify you for a child tax credit.

    Do you also pay for daycare expenses? That would probably qualify you for a child care credit.

    My point is, it’s quite possible the you could be claiming 5 exemptions on your W4.

    Confused yet? Sorry. Or maybe you’re divorced and you have a daughter but she lives with her mom and you won’t be able to claim anything for her, in which case I’d just claim single with 1 exemption.

    And if you’re just not sure what’s going to happen, single with 2 should – hopefully, cover you if you don’t get to claim her, and give you a nice refund if you do get to claim her.

    I’m really giving you worthless advice her. I apologize, but you see how confusing it can get. The best way to get a good answer for you is with the IRS calculator. It will take your actual information and give you a really good, close answer. IRS Withholding Calculator

  28. We have college students that work at a small, cooperative pool club. We bought a software to be able to calculate and cut paychecks for the lifeguards. They all earn less than 6,000 for the year and don’t want to have to wait to claim federal and state tax. How can we make sure only SS, medicare, and unemployment gets deducted?

    Thanks!

  29. Hi Brittanny,
    There is no penalty for not having the right number of dependents listed on your W4. The W4 is to help you withhold enough money to pay your tax, that’s all. Sometimes, you need to claim more exemptions to make the tax right. Sometimes you need to claim less. Everybody is different. That whole worksheet is to help you – but it’s far from perfect. I don’t know if you’ll owe or not if you change your W4. But you can go to the IRS withholding calculator, plug the numbers from your latest 2 in and it will tell you how to change your withholding so that you get a zero refund. That’s the safest bet.

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