Is it better to claim 1 or 0 on your W-4 Form if you are single and don't own anything?

Question

I heard you get more back each time you get paid if you claim 0, but less at the end of the year. Also, if you claim 1, you get more money back when you receive your tax return at the end of the year.

Answer 1

The more you claim on your W-4 (0, 1, etc) the less money the government takes out of your paychecks. However, at the end of the year, the amount of tax you pay will be the same, regardless of your witholding. The difference is whether the amount they took out was enough to cover your taxes for the year.

If you claim 0, you will have more money taken out of your paychecks, but your refund will be bigger (or if you owe, it will be less). If you claim 1 or 2, you will have more of your paychecks left over, but you may get a smaller refund, or owe more money at the end of the year.

To say it another way, let's pretend that you have to pay $12,000 a year in taxes.
If you claim 0, they may take $1500 a month in taxes from your paycheck. At the end of the year, you have paid $18,000 in taxes. ($1500 x 12 months). So you get a refund of $6,000.

If you claim 2, they make take $600 a month in taxes from your paycheck. In this scenario, you have an extra $800 a month to live on, save, etc. At the end of the year, you will have paid $9600 in taxes, and will have to pay an additional $2400.

Make sense?

In terms of which way to go, if you are really good at saving or investing, claim a high number and earn some interest on your money. If you tend to spend it all, then claim 0 and be safe.

Answer 2

1

Answer 3

Claiming 0 On W4

Answer 4

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RE:
Is it better to claim 1 or 0 on your W-4 Form if you are single and don't own anything?
I heard you get more back each time you get paid if you claim 0, but less at the end of the year. Also, if you claim 1, you get more money back when you receive your tax return at the end of the year.

Answer 5

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The best thing to do is claim 0 on your W-4 and do the same on your state withholdings. You should ALWAYS do this, even if you get married and/or have kids and could claim more exemptions. You can claim 1 if you want, but it is safer to claim 0. I'd advise that you NEVER CLAIM MORE THAN 1 exemption when you allocate your withholdings. If you claim more than 1 you can run into problems with particular situations and end up owing a lot of money when it comes time to file your taxes. SITUATION 1: MULTIPLE JOBS Each employer will withhold the appropriate amount on money based on the exemptions you specify on your W-4 and state withholdings form. Normally this is no problem when you only have one job, and have enough credits to offset your tax liability. If you took more than one exemption for each job you won't have enough withholdings because the IRS looks at the total income from ALL jobs and bases the amount of tax liability and credits on that total income. SITUATION 2: CAN'T CLAIM A DEPENDENT When you claim more than 1 exemption on the W-4 and state withholdings forms its usually because you have kids and this would be no problem come tax time because the child credits and personal exemptions the dependent(s) provides can offset your tax liability. Thing is, if someone e-files their taxes and claims your kids on their return before you file your return YOU CANNOT E-FILE AND CLAIM YOUR OWN KIDS, you'll have to file a paper return in order to claim them. Technically, the other person doesn't need to intentionally claim your kid to cause this e-file problem. They may be claiming an elderly grandparent that happens to have a similar SSN to your kid, but they transposed the numbers, so instead of being similar, that grandparent of this other person has the same SSN as your kid on thier return. This can easily occur in cases where the parents are seperated and share custody and they do not establish who will claim the child as a dependent. Another tricky situation is in the cases of multi-generation households, where if you were living with your parents, they may have claimed you and your kid (their grandchild) as dependents, which would prevent you from claiming your own kid unless you file a paper tax return through the mail. SITUATION 3: NON-STANDARD INCOME Self-Employment (Schedule-C), Lottery/Gambling Winnings, and cashing out an IRA (or 401k) early without withholdings can increase your total income. Since none of these have withholdings, the IRS expects you to pay on that extra income. Having your W-4 and state withholdings set to 0 exemptions can provide a better cushion against these types of situations, but the more exemptions you take the less protection you have. This is why taking 0 exemptions on your W-4 and state withholdings form is the best thing to do, it is always better to have too much withholdings than not enough, and you'll get back any extra money that exceeds your tax liability.

Answer 6

My goal is always to come out about even when I file my taxes. A big refund means you gave the government an interest free loan. A big tax bill can be burden and if you are too much under-withheld there are penalties.

If you itemize deductions you can claim additional exemptions for things like mortgage interest, real estate taxes, etc. The W-4 has instructions for that.

The forms are available at irs.gov

Same thing applies to state taxes. See your state tax department's web site for details and forms.

If you've never done taxes you can estimate your 2006 taxes by estimating your income and deductions and completing a 2005 tax form (for your own use)

Good luck to you.

Answer 7

The people above who say you should claim 0 are mostly misguided if you're looking for the highest return on your money.

One person above was correct in the math for the analysis for both.

In general, figure out how much you can actually deduct on your April 15 1040. Since you are single and have no dependents, you can probably claim 2 (single and personal exemptions).

If you claim 0 blindly, you are in essence giving the government an interest free loan.

For example, they'll take out an extra 100$ each month and then write you a check for a "tax refund" for 1200$ six to eighteen months later. There's no gain from that if the money was yours to begin with.

If you have no spending discipline, you could open a bank account and deposit that extra 100 each month and earn interest on it and be better off. There's no point in giving free money to the government in order to satisfy the appeal of getting a check for money that was yours.

You have the concept backwards. The more you claim on your W-4, the less they take each month.

Answer 8

I know this is old but let me clear the air a bit. I have always claimed 2 (single with no dependents) Then I set a withholding of 10$ -15$. Last year I got back 2,600$ on my refund plus I got a form from the IRS stating they owed me 120$. Claim 0 if you want to ;-).

Answer 9

I am married, which may be different, but we always claim 0, that way they take it all during the year (meaning they take the most allowed) and at the end of the year, we always get like 3000 back. So it depends if you need the extra money pay check to pay check or if you want it all at the end. Just look at it as a savings account if file 0. The gov't keeps it for you until you do your taxes. We have always claimed 0 and gotten back the same amount each year. So if I were you, I would claim 0. The more dependents you claim, the less money they take out of each paycheck and you will end up owing more at the end of the year, which is harder to come up with a large sum for most people. This is all per my CPA.

Answer 10

It depends on how much you make in a year. You may want to check into claiming exempt (This is where you pay no taxes). If you make over $7,000 a year though you would want to claim 1. People think that getting a bigger check from a refund is better but the government is only going to give you $0.28 on the $1.00 through a refund. You will end up with more money throughout the year if you claim more than 0.