Harveyspecter

Hi All,

In the first week of my new job earlier in the month, we had to fill out various forms for payment accounts and tax forms. I believe it's the W4 form where I had to put a number for allowances I wanted to claim with my federal withholdings.

As I am new to this, I asked the person in charge of helping us and explained that I am married with no children at the moment. So he said he would put 0 or 1 for federal witholdings.

I understand that the lower the number you put, the more you are taxed and thus get a tax refund usually. However I would rather pay less tax and not get a refund at the end of the year but at the same time don't want a considerable tax bill. I looked around online and it seems that as I am married I should put 2 for my federal withholding (myself and my wife). Is this correct?

Thank you

Pulaski

It's very hard to say, and whatever you put in may be wide of the mark. I would guess that two is about right, but the "correct" number might be four, or five. I heard on the radio a few days ago about a young, unmarried woman for who the correct number of deductions worked out to be five!

Don't worry too much in the first year, and erring on the side of over-withholding is better, as there is a (relatively small) penalty for under-paying tax during the year.

ian-mstm

I totally understand this... but you're talking about only a few dollars each pay period, which I can assure you, you'll hardly even notice. Whether you get a refund will be depend on any number of factors... and it's more than likely that you'll owe tax money anyway. So, I suggest you think less in terms of a refund and more in terms of owing less tax at the end of the year.

Ian

Rete

Me? I prefer a refund over having to shell out saved money to the government. My refund with 0 deduction would be about $400. I knew I would never save that $17 a pay period so was nice to have the refund. But then I was not a homeowner, didn't have moving expenses, charitable contributions, etc. Only the straight forward standard deduction.

Harveyspecter

Thanks guys, so would leaving it at 1 for now be the best course of action?

Harveyspecter

But surely it's best to put the money into savings where it generates interest? The government holds your money and doesnt pay interest on the tax return so in my mind it's better to put it into savings no?

ian-mstm

You're talking about only a few $$ over the course of a year. Not worth it, IMO.

Ian

Harveyspecter

Good to know, thanks. I'll leave it at 1 for now.

Rete

If you were talking about $100 or even $50 more in your paycheck with a higher number of dependents, then I would say if you were the careful and prudent type, yes you would put it in an increase bearing savings account. But for the most part it isn't all that much and you will just piss it away each payday.

As Pulaski said, try it for the remainder of the year and then make changes if needed. I fully understand not wanting to give the government money that you lose interest on but then again for the pittance that you get in a savings account you aren't losing much on what you might have been able to save.

Remember you can change the W4 withholdings at anytime during the year. You are not held to it for the entire tax period. And for the year 2017 you will have extra deductions to take off your income tax, i.e. moving expenses, real estate taxes if you purchased a home, etc.

Pulaski

Yes, in theory. In practice you need to avoid the penalty for tax owed (if it is more than $1,000), but we balance our taxes very close to $0 either way, as there is nothing p裏es me off more than learning in April that I had given an interest-free loan to the government last hear.

deadshoppingmalls

I'm married with a wife that stay's home with our one daughter. I claim 2 allowances and 0 deductions. I prefer to err on the side of caution and while yes...the government are having an interest free loan - I most likely would not have invested that money every month so any "return" would negligible.