Is there a rule of thumb for increasing your exemptions on your W-4?

Question

If a person gets a tax refund, is there a rule of thumb for increasing your exemptions on your W-4 in order to get more money back during the year? At one time, I heard that for every $600 you get back on your federal return, you can increase your exemptions by 1. This assumes that your financial situation is similar to last year.

Answer 1

You can figure it out exactly pretty easily at this site:
http://www.irs.gov/pub/irs-pdf/p15.pdf

Starting on page 38, find the section listing how you are paid (weekly, biweekly or monthly--single or married).

Find your salary range to see exactly how much would be taken from each pay based on the # of exemptions, & compare to your current withholding to decide.

This is all assuming that your income this year will be VERY similar to last year.

Answer 2

Rather than using a rule of thumb you should carefully review the worksheets on form w4 to be sure you didn't miss claiming an exemption you may be eligible for.
Over the years the w4 worksheets have become more complex.
Common lines missed are the child tax credit and for having only 1 job or for spouse not working.
By the way, If you wanna use a rule of thumb I believe the rule of thumb nowadays is more like $1000 per exemption rather than 600.

Answer 3

Do not alter your exemptions. Instead do the calculation on the back of the W-4 to work out the adjustment to be processed via the payroll. The IRS has started looking at exemptions claimed on W-4's rather closely.

Answer 4

Ignore the worksheets on the W-4 and use the calculator in the first answer.

Answer 5

The IRS website has a calculator you can use to figure this out (see link below). Just follow the instructions, and it will calculate what you can use on your W-4.