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

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

  1. Hi Janice,
    I have no idea. I don’t know what you make, if you qualify for EIC, or anything. The year is over, file your taxes and you’ll know. Then adjust your withholdings accordingly.

    But quite frankly, I would rather see you claim 10 exemptions than say exempt. That said, you’re single with one child. Even with EIC, I’m still thinking you wouldn’t want to claim more than 5 exemptions if your income is low.

  2. Hi James
    You asked a good question, you’re single with no kids and you’re working a lot of overtime hours. Here’s the thing–if you’re working at only one job, then I would say still claim single with 1 exemption because the payroll software will compute it so that you’re withholding enough taxes for the income that you’re earning. It usually works out okay.
    Now, if you’ve had problems in the past and you’ve owed, go ahead and adjust your withholding down to zero exemptions. But, if you’re claiming single with one exemption, you really should be okay.
    If you’re working two or more jobs though, then you really want to do single with zero and maybe even withhold extra because you’re getting kicked into a higher tax braket. Then you’d want to use the IRS withholding calculator.

  3. Hi Daniel,
    Thank you for your service to our country.
    Now for the tax stuff. You’ve got a problem. First, claiming 4 exemptions was too many to begin with. On top of that, your income from your job is over and above the income on your military pension and so you’re probably being kicked into a higher tax bracket.
    I’ve dealt with this with a number of veterans. Your pension alone has you in one tax bracket. Your job alone has you maybe in the same tax bracket. The pension and job together put you in a higher tax bracket and you haven’t withheld enough.
    This is similar to being married with both spouses working, you claim married with 2 exemptions for the higher paying job (or pension), and withhold at the higher single rate on the other job (or pension). (Once again, using the IRS withholding calculator will give you a much better figure.)

  4. Hi Anna, #44,
    That’s a really good question. Your employer hired another company to process payroll and now it looks like you work for the other company. Actually, it is legal, and it might even be more legal than how he did his payroll before. (Not that I’m saying he was doing something wrong.)
    You see, payroll is really complicated. And with all the Affordable Care Act rules, unemployment compensation, and general weird stuff, it’s really easy to get into trouble if you do just the slightest thing wrong. One way to avoid trouble is to hire a payroll company (ADP is probably the biggest one.)
    But not only can you just hire them to be a payroll company, you can actually hire them to be a “professional employer organization”. There’s different types of these. Sometimes, your employer will fire everybody and then you get hired by the organization and he “rents” you. I think with the big payroll companies, they become “co-employment partners”. I like that better, you’re never fired, just moved under that company’s umbrella.
    This helps make sure that your employer is doing everything legal as far as workman’s compensation, ACA, and income tax withholding.
    So while is may sound a little hinky, it’s probably for the best. The question to ask is: what company is he using? Then check them out on the Better Business Bureau website to make sure they’re a legit company. If they check out there, then I wouldn’t worry about it.
    For what it’s worth–I used to work for a guy (many years ago) who was withholding our income taxes, but he never sent the money in. He got letters from the IRS but ignored them. As employees, we didn’t know what was going on until we showed up to work one day and found a big padlock on your front door placed there by the IRS. A good payroll company will make sure your withholding taxes get paid and all the other stuff gets taken care of too.

  5. Hi Vanessa,
    Shooting from the hip–I’m guessing you’re okay. The year is over so if you do owe, you know to claim fewer exemptions next time. If you’re even or in refund mode, then I guess you’re okay.

  6. Hi Shay,
    Your income was so low for the year that you should have no tax liability at all. With your daughter on your return, you should also have a child tax credit of $1000 and maybe some EIC if you can qualify of around $2000 so that should really help. Good luck!

  7. Hi Wayne,
    I’ve never heard of anyone being penalized for withholding too much income tax on their paycheck. Now–if you over withhold the state income tax, and you’re in a high income tax bracket, you could be hit with the alternative minimum tax. There’s a risk there, but you can easily correct that next year if necessary.
    But as far as regular withholding, I actually have some clients where I set them up so that all of their paycheck goes to their tax withholding (because they have other income and are in a high tax bracket, it’s not a normal kind of thing.) So you’re pretty safe withholding as much as you want.

  8. I am married filing jointly. I work for an employer. I marked 2 exemptions. I should be in the 15% bracket, yet my Fed Income is only withholding 8% while SS and Medicare with Fed are just over 15%. Is my 15% withholding supposed to be 15% with SS and Medicare, or is it supposed to be 15% with Fed Income only? Why would my withholding percentage be so low if I am married and I claimed me and my wife?

  9. in my family its 5 of us 3 kids and my partner who doesnt work what should i put on my pay check 1 or 2 or 0 ???

  10. i just want an estimate single mom 2 kids claim 0, last year to claim my daughter. I want to still receive my large tax return but with insurance now coming out I was wondering how many i can claim but still keep a big return? example make about 27,000 receive back around 8,900. is every allowance $100 or like $1000?

  11. I’m married with 2 children living in the same household. My husband has a slightly higher salary. Should we each have an allowance for each child for W-4? Do we both include the allowances for child care credit? We pay over $8,000 in child care a year. However, we both participate in a pre-tax spending account with our employer for childcare cost.

  12. Hi Ms. Roberg,
    My husband made 52,800 and claimed 5 dependents on his W-4. Were just realizing that they only took 700.00 out for fed. We have 4 children, no mortgage, no 401K, We pay daycare 700.00/a month. My YTD is 7k. Will we get a return or will we owe? Please help, we can not afford to pay the government.

  13. Can I claim 10 if I’m single with no kids making $90,000/year and pay it back during tax time or will I receive a penalty?

  14. I am trying to figure out what to put on my w-4 for me and my wife. We recently got married in 2015 and had child in November. She will begin employment in February, what should we put for exemptions and allowances? I make 85-90k a year and she will make 50-55k a year.

  15. Hi Marvin,
    That’s a really good question. Let me try to explain.

    You’re in the 15% tax bracket, but when you look at the withholding on your pay stub, it looks like that only took out 8% for your federal taxes. Why is that?

    The US has what’s known as “progressive” taxes. We’re not all taxed at the same rate. And, as your income gets higher, the tax rate gets higher. And, remember there’s part of your income that has zero tax rate. Remember, you have 2 exemptions. So that’s $8000 of income that doesn’t get taxed at all. And you’re married, so using the standard deduction, that’s another $12,600 that doesn’t get taxed either.

    So, let’s say your annual income was $50,000. Of that $50,000 the first $20,600 would not be taxed at all. (Because of your exemptions and your standard deduction, right?)

    So you take the $20,600 from the $50,000 and you have $29,400 remaining to tax right?

    Then, the first tax bracket is the 10% tax rate. But the 10% tax bracket only goes up to $18,450 for you (married filing jointly). So you’ve got $1845 of tax. (18,450 times 10% = 1845.) And then you take the $18,450 from the $29,400 to see how much to tax at the 15% rate. So, $29,400 – $18,450 = $10,950.

    So, now you take that $10,950 and multiply that by 15%. That’s $1,642.50.

    Now you add that all together. $1642.50 plus the $1,845 and your tax is $3,487.50. So in this case, the actual tax rate is 7%, even though at $50,000 you’d be in the 15% tax bracket.

    Is this making sense? The 15% is what we call your “marginal tax bracket”. Each new dollar you make is taxed at 15%.

    Because you’re married, your brackets and exemptions are different than someone who is single, or considered to be head of household. We’re all kind of different. Here’s a link to the 2015 and 2016 income tax brackets: http://www.bankrate.com/finance/taxes/tax-brackets.aspx

  16. Hi Kajuan,
    Hmmmm. Your family has 5 members. You, three kids, and your partner who does not work. How many exemptions?
    My question to you is: Who’s kids are they? If they are your children, then you may claim each one that you are the biological parent to. If they are not your kids. I wouldn’t touch it.
    Of course, you may claim at least one exemption for yourself. If your partner does not work, and is not expected to work all year, then you could claim a second exemption, but I hate to suggest that. People get jobs, and events change so you’re better off not claiming your partner.
    So, one exemption for you and one for each biological child.

  17. Sorry Kasey,
    I get paid to run numbers. I can’t afford to give individual answers online. You can call my office, I charge $50 for a half hour consultation by phone. Sorry, gotta pay the mortgage.

  18. Hi Angela,
    My standard answer to you is that your husband (who earns more) claim both children and you claim zero and withhold at the higher single rate. Your child care credit doesn’t count for anything because your childcare is paid with pre-tax dollars.

  19. Hi Jill,
    Sorry I can’t do your taxes for free online. But, you can run your numbers for free on my “Do Your Own Taxes” page. See the link at the top? It will tell you where you stand.
    But, just a quick estimate tells me that you’re going to owe. (Also, I think more should have been withheld if he claimed 5 exemptions, but he should check with his HR department.)
    But yes, you should be prepared to pay some tax. The good thing is, you’ve got a few months to figure this out.

  20. Hi Tonio,
    There’s a penalty for under withholding. It’s not huge, but it’s still there. Also, why would you want to? It’s way easier to just withhold the right amount up front. Trust me on that one. Just withhold the right amount now, it will save a headache later. You can’t imaging how many people have told me, “I saved for my taxes and then X happened.” X is always going to happen. But you’re not supposed to pay for it with your tax account. You’re supposed to pay for it with your emergency savings account. The tax money and emergency money are not the same thing. So, render unto Caesar what is Caesars. I certainly didn’t come up with that slogan, but it’s still pretty sound advice.

  21. Hi Josh B.
    I highly recommend the IRS withholding calculator because you’ve got good numbers to work with. Barring that, I’d put 3 exemptions on your W4 and have your wife claim zero and withhold at the higher single rate.

  22. What happens if you have one child and file two dependants and for the whole year of 2015 there were no federal or state taxes taken out of five pay checks?

  23. In 2015 I was a student and got paid minimum wage for part time work and had very little tax liability. I am starting a full time engineering job in 2016 making around 70,000. It appears that I could just claim a tax liability of 110% of my 2015 taxes and just have a massive tax due in 2017 with no penalties. Is this correct? Then would it be like a 1 year tax free loan?

  24. Hi,

    Last year I worked a lot of over time and each pay check ( biweekly) I was getting hit around 500 dollars federal tax alone.

    This year I have student loans and engaged and head of the household. I did the calculations and I would really like to put 8 for my withholding allowance that way I ge t more on my paycheck. Is it possible to put 8 as my withholding allowance? I can’t find any information about this,

    Thank you

  25. Hi,
    I’m wondering about my partner’s 2016 w4. In our household it is me, him, my biological daughter and our newborn daughter. How many exemptions should we claim? My biological daughter’s father is not in the picture, we have been living together for over a year (me, partner, my daughter), and I am no longer working this year to care for my newborn. Thank you.

  26. Hi! Somehow my exemptions for the year was put in incorrectly as 6 instead of 2 and I did not realize it until I got my w2. I will be claiming 2 children and I am a single parent. Will I be penalized a lot for this?

  27. Howdy!
    I have a question about my husband and my taxes. We had 5 children living with us January thru June last year and now my oldest lives with her dad. He is asking to claim her on his taxes. I’m ok with this, but since she will be filling out a FAFSA for the first time this year I want to be sure she has the best leg up. Our family is Married with hubby as head of house(my income is very low <$7000) His is ~$50k and we will claim me +4 (or 5) kids. My ex husband is single with income around $40k and wants to claim 1 child.

    Thanks for this website. It's very helpful!

    Danielle

  28. Hi JMcC,
    Yes you could, but I don’t recommend it. If you put the money in the bank, you’d get at the most 1% interest, if that. And things happen. Tax time will come around and your car will break down, you’ll be in the hospital, someone will die, the roof will leak…..fill in the blank. And you’ll use that tax money that you’ve saved up for some other emergency. I’ve heard it a thousand times. So just do the proper withholding AND save money in the bank to cover that emergency that is going to happen. You’ll be glad you did.

  29. Hi Abdel,
    You’re engaged, congratulations! So will you be married before the end of 2016 or not? That will make the huge difference. If the wedding is in 2016–then definitely don’t do 8 exemptions. You and your fiance will want to do the withholding calculator together and figure out how to withhold as a married couple.
    If the wedding isn’t going to happen, then run the calculator as head of household with just your income. My gut says that 8 is too many for you. If you had $500 in federal taxes taken out of one check, that tells me that you’re probably not getting any EIC. And even though you have a lot of student loan debt, the maximum deduction is $2500 – but if your income is really high–you might not get a deduction at all. So I strongly recommend the withholding calculator before you up your exemptions.

  30. Hi Alyssa,
    It depends. Are you going back to work ever in 2016? If you are, then he should claim 1 exemptions. If you are absolutely not going to work in 2016 at all–no way, no how, not in a million years, then he could claim 4, assuming the biological father is truly out of the picture. (Partner cannot claim EIC for your child, but could do the exemption if he provided the support for the entire year–not 11 and 1/2 months, 100% the entire year!)

    So, I would say, claim 1 and be happy if there’s a refund. This way his backside is covered in case you walk. Even if you two are solid, if you go back to work, it may make more sense to put the kids on your return. If that’s the case, claiming one keeps him from having to owe when you decide that the best thing for your family is to put the kids on your return.

    If your status changes and you two get married, then he could switch to 4 exemptions, and if you go back to work, you’d claim withholding at the higher single rate with zero exemptions. But until you marry, I think he’s best keeping his exemptions on his W4 at 1.

  31. Hi Shaquita,
    I don’t know. It all depends upon your income. You could be just fine. Just file your taxes. You can check right here on this website, just go to the “do your own taxes” tab and plug in the numbers. Then you’ll know.

  32. Hi Danielle from Texas,
    If you and your hubby are legally married, he can’t claim head of household on his taxes and he can’t claim you as a dependent. So I’m guessing that you are “married” but not legally married? But I don’t really know.
    I strongly recommend that you go to a tax professional and make sure that you’re filing everything correctly, just to make sure.

    As far as FAFSA goes, the person paying the tuition should be the one applying for the FAFSA. (Actually, the student applies for the FAFSA and puts the parent info on the form, but we all know the parents are the ones doing the paperwork.) That said, I know that families “switch” all the time. But, if you’re filing something you really shouldn’t be filing, I’m not so sure you want another government agency taking a look at your taxes.
    So, first make sure you’re filing correctly. Then I’d ask the financial aid office what would be the best for the FAFSA. Good luck.

  33. Hi, your page has been a big help! I notice that you suggest that if you’re married with children, that the spouse with higher income should have the W4 withholding , and the other spouse withhold 0, but why is that? Also, is there any disadvantage or advantage to doing it that way instead of the other way around? Thanks!

  34. I am a single mother with one child as well as one job I’m working overtime and I have so many taxes taken out what should I do to have less taxes withheld but not be in trouble owing taxes?

  35. Hello,

    I’m active duty and my wife is a civilian who both work and make around 32k each and have 3 kids. The calculator says to claim 10 exemptions, is this correct??? I’m very new to this subject.

    Thank you,

  36. Hi Lisa,
    If you may legally claim your child for EIC on your tax return, then definitely do so. It doesn’t matter that you did not claim your child on your W4.

  37. Hi Yolanda,
    You can easily claim two exemptions on your W4. And I’m pretty confident that you can claim at least 3. Depending upon your income, you may even be able to claim more. How about filing your taxes and seeing just how big your refund is and adjust accordingly? Don’t forget to check out the IRS withholding calculator. Now’s a good time to check it out.

  38. Hi Steve,
    Thank you for your service to our country. My gut reaction is that 10 exemptions is too high. If you each make 32K, then you’re not looking at receiving any EIC. So, I’d say you would claim 5 exemptions and your wife would claim single with zero.

  39. My husband and I both work and we always get a huge refund. He earns much more than me and believes in grossly overwithholding so that we are never faced with a huge tax bill. His salary is what runs the household; my goes mostly into savings so it seems a shame to “loan” that money from my pay to the government until refund time. We have never owed taxes in all the years we have been working. My question is how many exemptions can I take in order to have less money withheld from my pay. If you get to a certain number like 10 or more can it cause a problem with the IRS? I don’t want any problems!

  40. Hi Eleanor,
    This is a funky kind of answer. I don’t recommend this to other folks, but for you it might be just the thing. File your taxes for this year. See how big the refund is. Now, look at how much you withheld from your W2. If the refund more that your entire withholding? If yes, then claiming 10 exemptions might be the thing for you to do.
    If your refund is less than your withholding, then you’ll need to adjust, 10 would be too much. It depends upon how many exemptions you’re claiming already.
    But here’s something else: is the refund going into your savings anyway? Or are you planning something else with the money? I mean, shouldn’t you and your husband work together on this? If the refund is going into savings–then no real foul–you’re not losing that much in interest.
    If you want to get your refund closer to zero though, use the IRS withholding calculator. It strives for a zero dollar refund.

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