Author Topic: W-4: How many exemptions can you claim?  (Read 677 times)

phildonnia

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W-4: How many exemptions can you claim?
« on: January 30, 2019, 02:36:20 PM »
Quick tax question:

Are you allowed to claim more exemptions than the number of bodies in your household?  Dave Ramsey advocates this for finessing your withholding amount, and I've seen tax professionals on the internet say that it's perfectly OK to claim 20 exemptions and then make it up with estimated tax payments.

I would like to do this myself, as my withholding is too high at the beginning of the year and too low at the end.  I can do a better job than whatever formula is being used for withholding.

The only problem is that little line at the bottom of the W-4 that says "Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete".   

So is it legal or not?

TexasRunner

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Re: W-4: How many exemptions can you claim?
« Reply #1 on: January 30, 2019, 02:56:57 PM »
Post To Follow.  I am doing the same thing this year... After expecting a 7k ish return this tax season. 

The withholding tables (seem) to be garbage...  Right now I'm increasing the deductions to the max according to the table, and hopefully that won't be too much since I have side income.

Having variable income (commissions) also seems to screw it all up.  Hopefully an HR rep or tax accountant can throw in the 2cents.
« Last Edit: January 30, 2019, 02:59:05 PM by TexasRunner »

phildonnia

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Re: W-4: How many exemptions can you claim?
« Reply #2 on: January 30, 2019, 02:58:37 PM »
PTF.  I am doing the same thing....  And am expecting a 7k ish return this tax season. 
The withholding tables (seem) to be garbage...

Right; I understand everyone does it.  Is it legal?

TexasRunner

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Re: W-4: How many exemptions can you claim?
« Reply #3 on: January 30, 2019, 03:00:57 PM »
PTF.  I am doing the same thing....  And am expecting a 7k ish return this tax season. 
The withholding tables (seem) to be garbage...

Right; I understand everyone does it.  Is it legal?

I have no idea...  My gut instinct says that it isn't, but perjury would require someone actually care enough to convict you of it.  So if you made millions through your employer and listed 8000 dependents to keep from withholding anything, obviously the IRS would fine you, but I don't know that any action ever actually would (or could) be taken on you due to that statement.

:/

katsiki

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Re: W-4: How many exemptions can you claim?
« Reply #4 on: January 30, 2019, 03:14:30 PM »
I cannot answer about legality but agree this is very common and accepted.  If you are nervous, do a smaller but reasonable number.  Don't do 20; do 8 for example.

blue221

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Re: W-4: How many exemptions can you claim?
« Reply #5 on: January 30, 2019, 07:38:50 PM »
Its legal. When using the IRS withholding calculator, it will produce the # of withholding exemptions you should enter and it is often much greater than the number of individuals in your household.

lisa_mustache

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Re: W-4: How many exemptions can you claim?
« Reply #6 on: January 30, 2019, 08:47:05 PM »
I have a family of 5, and am the sole earner.  I claim 9 allowances to be as close to a $0 refund as I can.  I just had my brother fill out a new W4 with 7 allowances, and a family of 3 (he is getting a $6k refund, and can use that money better throughout the year).  There are some good, free W4 calculators online that can help you figure out what makes sense to not owe too much or get too much of a refund.

Good luck!

Edited for terminology
« Last Edit: February 01, 2019, 12:20:07 PM by lisa_mustache »

v8rx7guy

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Re: W-4: How many exemptions can you claim?
« Reply #7 on: January 30, 2019, 10:10:41 PM »
Family of four, 8 with holdings for 2018, bumping it up to 10 for 2019 as I still received a $700 refund during 2018 and we have another on the way.

sol

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Re: W-4: How many exemptions can you claim?
« Reply #8 on: January 30, 2019, 10:45:51 PM »
How many can you claim?  I believe the answer to that question is 99.

The "under penalty of perjury" part is you certifying that you are not filling out the form with fraudulent intent, not that the number of withholdings corresponds to your family size.  Only that it corresponds to what you wanted as part of legally completing the form.

So you're good. 

seattlecyclone

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Re: W-4: How many exemptions can you claim?
« Reply #9 on: January 30, 2019, 11:08:47 PM »
Quick tax question:

Are you allowed to claim more exemptions than the number of bodies in your household?

Yes, of course. The instructions on Form W-4 even suggest many situations where you should do exactly that. For example, the worksheet suggests that a married couple with one wage earner and two kids, earning $70,000 salary and no income outside of the job should report 11 allowances.

reeshau

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Re: W-4: How many exemptions can you claim?
« Reply #10 on: January 31, 2019, 03:27:54 AM »
Quick tax question:

Are you allowed to claim more exemptions than the number of bodies in your household?

Yes, of course. The instructions on Form W-4 even suggest many situations where you should do exactly that. For example, the worksheet suggests that a married couple with one wage earner and two kids, earning $70,000 salary and no income outside of the job should report 11 allowances.

You are fine to claim whatever exemptions that allow you to reduce your refund (I think it works out to around 1 additional exemption per $1,500 of refund, but that's before the last big tax bill)

Where you could run into problem is if you claim a high number of exemptions, but then owe tax.  This comes under the same parameters as other ways of underpaying / owing big, like not making estimated tax payments if you are self-employed or through taxable investments.  There are safe harbor provisions based on the taxes you paid in the prior year (based on a percentage of tax paid).

There are a number of calculators to help you out, including from the IRS: https://apps.irs.gov/app/withholdingcalculator/

phildonnia

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Re: W-4: How many exemptions can you claim?
« Reply #11 on: January 31, 2019, 05:58:32 PM »
For example, the worksheet suggests that a married couple with one wage earner and two kids, earning $70,000 salary and no income outside of the job should report 11 allowances.

You know, I never actually looked at the worksheet.  Oh, wow, what a freaking mess.  But you're right, it explicitly gives you numbers that don't correspond to your family size. 

CareCPA

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Re: W-4: How many exemptions can you claim?
« Reply #12 on: January 31, 2019, 08:46:27 PM »
If your tax situation is simple, just claim 99. Then, on the additional withholding line, take total federal income tax for the year and divide by the number of paychecks. No worries about over- or under-withholding.

NotJen

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Re: W-4: How many exemptions can you claim?
« Reply #13 on: February 01, 2019, 06:50:45 AM »
Whew, the terminology in this thread is all over the place.

On the W-4 form, you claim allowances.  Allowances do not equal the number of people in your household.  They don't equal the number of personal exemptions that you take on your taxes (which are actually not a thing any more under the current tax law).  Allowances are a somewhat convoluted way of estimating your tax due at the end of the year based on household composition, earnings, and expected deductions.  The two-earner/multiple jobs worksheet is VERY important if you're married or have multiple jobs.  Your employer only knows what they pay you and the tax tables - allowances are a standardized way of adjusting your withholding based on your specific tax situation.

I'm not sure how much each allowance is "worth" this year, but it looks like it was $4,150 in 2018.

Fill out the personal allowances worksheet on the W-4 form, as the instructions direct you to, and get a good number.  The online IRS withholding calculator also used to be helpful (though I just tried it for 2019 and I can't make sense of the results, soo....).

Nothlit

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Re: W-4: How many exemptions can you claim?
« Reply #14 on: February 01, 2019, 02:17:42 PM »
Whew, the terminology in this thread is all over the place.

On the W-4 form, you claim allowances.  Allowances do not equal the number of people in your household.  They don't equal the number of personal exemptions that you take on your taxes (which are actually not a thing any more under the current tax law).  Allowances are a somewhat convoluted way of estimating your tax due at the end of the year based on household composition, earnings, and expected deductions.  The two-earner/multiple jobs worksheet is VERY important if you're married or have multiple jobs.  Your employer only knows what they pay you and the tax tables - allowances are a standardized way of adjusting your withholding based on your specific tax situation.

I'm not sure how much each allowance is "worth" this year, but it looks like it was $4,150 in 2018.

Fill out the personal allowances worksheet on the W-4 form, as the instructions direct you to, and get a good number.  The online IRS withholding calculator also used to be helpful (though I just tried it for 2019 and I can't make sense of the results, soo....).

Thanks for injecting some sanity into the discussion. I am convinced that the vast majority of people never stop to actually read the instructions that accompany the W-4. This is not helped by the fact that many employers use a "substitute W-4" that is just an online form on the company intranet with no accompanying instructions.