When tax season rolls around, are you surprised as to why you owe money to the IRS? Where is your refund check? Read below to find answers.
How many allowances are you claiming on your Form W-4 (Employee's Withholding Allowance Certificate)?
VERY IMPORTANT! This determines how much tax is taken from your pay and the size of your tax refund (or how much you will owe).
The amount of personal and dependency exemptions will differ if you are single, married, have children, etc.
Claiming Zero Allowances
The maximum amount of taxes will be withheld and you will most likely receive a refund when filing your tax return. However, this means less take-home pay on your paycheck.
If you are claimed as a dependent on someone else’s tax return, you should claim zero allowances.
Claiming One Allowance
If you are single and have one job, claiming one allowance will most likely result in a refund when you file your taxes.
Claiming Two Allowances
If you are single, claiming two allowances will get you close to your tax liability but may result in tax due when filing your taxes
If you are single and work more than one job, you can claim one allowance at each job or two allowances at one job and zero at the other
If you are married, you should claim two allowances
Claiming Three Allowances
If you are married and have one child, you should claim three allowances
If you file as head of household you can claim additional allowances
If you had at least $1,900 of child or dependent care expenses that you plan on claiming credit
If you are eligible to claim the Child Tax Credit
When Should You Fill Out a New W-4 Form?
Employees can submit a new W-4 form to their employer at any time during their employment. If you recently took on a second job, had a baby, married, or divorced, then you'll want to change your W-4 withholding.
A great tool to help you while filling out a W-4 is the IRS Withholding Calculator, located on the IRS website.
The number you report on a W-4 will ultimately determine your take home pay and your tax refund. Don’t write down any number. Take the few extra minutes to really assess your situation and fill out the W-4 accordingly. By doing so you’ll less likely find yourself in a difficult financial situation.