The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: vertkurt on September 03, 2017, 11:04:24 AM
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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.
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Hello all, I haven't had an income for over 4 years....
If you meet the criteria in Estimated tax not required (https://www.irs.gov/publications/p17/ch04.html#en_US_2016_publink100032383), 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 (https://www.irs.gov/pub/irs-pdf/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)/
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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?
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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 (http://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/) (or a full copy of TurboTax, etc.) if you would like to do some "what if...?" studies.
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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?
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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). ;)
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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.