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

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

  1. Hi! I just had a baby in March, I am single, and I work two jobs (combined earning less than 16,000/year) should I claim my son at each of my jobs? I don’t want to owe!

  2. Hi Jeff,
    If it doesn’t look like any FICA’s been withheld, you might be considered contract labor. If that’s the case, you could get hit with 15.3% self employment tax, even though your income is probably low enough to keep you from paying any income tax this year. I’d check with your employer about the FICA. If he’s treating you as contract labor, you need to know so you can adjust accordingly. If they haven’t taken out any federal income tax – that would make sense given your withholdings. But even if you only made minimum wage, they’d still take out FICA. If they’re taking out nothing, that sounds like you’re being treated as contract labor.

  3. hi im a single mother of 2 i have 2 part time jobs and im a full time student in college. what is the best way to fill out a w4?

  4. Hi Stephanie,
    Congratulations! I think that you’ve fine claiming 2 exemptions on each of your jobs. Now for most people, I’d say no, don’t do that, but with your income being only $16,000 for the year, and with you claiming your son on your return, you should be in refund mode no matter what. Remember that you’ve going to claim the child tax credit and the earned income credit so you should have a refund even if you had no federal withholding at all this year.

  5. Hi Charity,
    So the question becomes, who’s going to claim the children as dependents? Are you living with your parents or the children’s father? Then they may be claiming the kids on their return, in which case you would want to claim single with no exemptions on your W4. (Taxes get taken out.)
    Or, are you living by yourself and supporting those kids and going to school full time – (when do you sleep?) in which case you could probably claim exempt. (No tax gets taken out.)
    Good luck with school and the kids!

  6. Hi Jan,
    I am married and just had twins. i am employed but my husband makes more money than me. I own a house but he is not on the title. Who should claim the kids? Me, since I own a house or him because he makes more money?

  7. Hi Stephani,
    Congratulations on your twins! How fun and exciting!

    I so wish that you were in my office sitting across from me so I could see pictures of the little ones and explain this in my loving, kind, you know what I mean voice, ‘cuz I’m not sure it will sound right typing it out like this. So, please hear the loving voice okay?

    Girl – you are married! You are a team! Do you claim the kids because you own the house or does he claim them because he makes more money? I’m pretty sure you didn’t mean it the way it sounded.

    I’m guessing you mean who claims the kids on the W4, since that’s the page you’re asking that on – but just in case. When you file your tax return, you will file as married filing jointly, you will both claim the children as your dependents, and you will claim the deduction for the house together as well. (And of course you’ll claim all the other deductions and credits you are entitled to.)

    So as a team, it’s easiest if he claims the kids and you withhold at the higher single rate with zero exemptions. BUT – and this can be really important, if he’s not being a good team player, you don’t want to have all the tax money come out of your income while he gets more income because he’s claiming all the deductions. (And quite frankly, even if your husband is absolutely perfect and a great team player, sometimes it’s just kind of annoying to be withholding extra because you make less than your husband. I am speaking from experience here!)

    So, what you can do is go use the IRS withholding calculator and use your most recent pay stubs to figure out how you should adjust your W4s. It might be a little fairer than having him claim everything and you claiming nothing.

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