New member W4 help

[vertkurt]

Hello all, I haven't had an income for over 4 years and have a job starting Oct 1. As a new employee, I have to fill out a W4 and present it to the new hire orientation. I was just going to claim 1 b/c I'm single no dependents, but I also don't want to give the government more money than I should. I have significant student loans to pay off and I feel that money could be better used if it went into the loans.

I tried using some online calculators, but they all assume you have previous pay stubs. Any help would be appreciated.

[MDM]

Hello all, I haven't had an income for over 4 years....

If you meet the criteria in Estimated tax not required, you don't have to withhold anything for 2017.  You would owe your full 2017 tax when you file in 2018.  Make your W-4 allowances high enough and nothing will be withheld.

You probably can't claim "Exempt" on line 7 of the 2017 Form W-4 - fw4.pdf due to the second condition, but if you do qualify then that is the easiest path.

Some similar discussions that might be worth reading:
http://forum.mrmoneymustache.com/taxes/best-way-to-calculate-w-4-exemptions-for-2016/
http://forum.mrmoneymustache.com/taxes/would-you-rather-owe-or-get-a-refund/
http://forum.mrmoneymustache.com/taxes/am-i-witholding-too-much/
http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/
http://forum.mrmoneymustache.com/taxes/best-paycheckwithholding-calculator(s)/

[vertkurt]

Thanks for your help.

I actually  might be able to claim "Exempt" on line 7. Since I'm starting work so late in the year I'll only be making ~$11,000 in 2017. This appears to be over the $10,350 under the single filing status. However, I will be contributing to my employers 401k so that will bring my income under the $10,350. Will this make me exempt?

[MDM]

Thanks for your help.

I actually  might be able to claim "Exempt" on line 7. Since I'm starting work so late in the year I'll only be making ~$11,000 in 2017. This appears to be over the $10,350 under the single filing status. However, I will be contributing to my employers 401k so that will bring my income under the $10,350. Will this make me exempt?

Yes.  If, assuming
- your gross income is exactly $11k, and
- you are eligible for the saver's credit (not being classified as a full-time student in 2017 is one of the criteria), then
contributing $100 to a t401k will take your federal tax to $0.

Any further 401k or IRA contributions should be Roth, because you will have no (at best, 7.65% due to the EIC, if eligible) marginal saving rate for those.

See the case study spreadsheet (or a full copy of TurboTax, etc.) if you would like to do some "what if...?" studies.

[vertkurt]

Wow! Thank you for your expertise.

I was a full time student this year up until July, so It seems I will not be eligible for the savers credit. I calculated my income exactly to be at $11,188.

After meeting the employer match for the 401k, I will be maxing out my current Vanguard rIRA.

Does contribution to the t401k still make me tax exempt in this instance despite being a student for half the year?

[MDM]

Does contribution to the t401k still make me tax exempt in this instance despite being a student for half the year?

Yes, if you contribute enough.  Determining "enough" is your homework (but use of the tax tools mentioned previously will help a lot). ;)

[stepitup]

Remember, you can always change your W-4 later. While it might be a longer process for some employers, for others its very easy. For example, my current job lets me just do it online anytime I want.