I have no dependents, and recently I noticed that being single with one job allowed me to have up to 2 allowances. Since I've made the switch from 0 to 2, I've noticed that the amount of Federal and State taxes have almost significanlty reduced, which is a good thing, But I want to know in terms of a Refund for the year of 2007 will I inevitably owe, or will I just see a reduction in the amount of the refund I'm used to getting? Is it worth it to see the difference in my actual paycheck, or should I just let the government take what it wants and just refund me?
2007-01-06 11:49:05 · 6 answers · asked by cherripye99 2 in Business & Finance ➔ Taxes ➔ United States
I would switch to one allowance. When I went to more allowances than I actually had, I ended up owing taxes because they are taking money out like you have two people's worth of deductions to claim. Since I only had one, it meant there was more money that they taxed on than my allowance counted for, and so I had to send in.
2007-01-06 12:00:32 · answer #1 · answered by cerah_micah 3 · 0⤊ 0⤋
The tough thing is no one can easily answer that question because everybody's tax situation (income, deductions, etc.) are different. HOWEVER ... there is a good technique to reduce your refund check to as close to zero as possible (which should be your goal since you don't want to give the government free use of your money for a year). Experts state your goal should be to get back zero dollars on the refund check, but be satisfied if you are within plus or minus $500.
OK ... here's a good trick:
First, check through your records (or memory) and find out how big your refund check was last year (or how much you owed). Take that number and divide it by 12. This is the number that you want to change on your monthly take home pay.
Ex. You got a refund last year of $1,200.
Divide by 12 ... that's $100. So ... you're goal should be to change you withholding little by little until your take home pay increases by $100. If your take home pay is $2,000 a month you want to target raising that to $2,100 a month.
Now ... change your allowances by 1 or 2 numbers and wait a month and see how much your take home pay changed. If it's within a few dollars of your goal of $2,100 stop. If it's a lot less, increase the allowances (i.e. go from 1 to 2) and if it's a lot more, decrease your allowance (i.e. go from 3 to 1). After you change your allowances, wait a month and adjust again if you need to until you've dialed in the right number.
This works ... I've done it myself ... and it sure is nice to get more money back every month (even though I no longer get that huge check once a year).
Also ... you can claim more than 2 allowances if you want to ... the government allows you to withhold more or less from your pay to target basically owing zero dollars at tax time. Your HR department should be able to help you do this ... it's fairly simple.
Good Luck!!
2007-01-06 20:19:35 · answer #2 · answered by Informed1 4 · 0⤊ 0⤋
You can calculate how much less is coming out of each check. Multiply that by the number of pay periods. If the total is more than your refund has been, then you'll probably owe when you file. If it's less, then you'll get that much less back.
The numbers change a little every year, but if you didn't get a huge raise or something like that, this will give you a rough estimate.
If you get a big refund every year, you're giving the government a no-interest loan of your money for the year, so it makes more sense to come as close to even as you can at the end of the year.
2007-01-06 20:10:42 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
Well, that really comes down to what you like...
If you pay in more then you should, yes you get a refund - but it is interest free... If you are paying much more than you should, that's not such a good idea. However, if you have trouble saving, then perhaps it is a good thing.
On the flip, giving as little to the gov't beforehand keeps the money in your hands and allows you to do whatever you want with it... The down side is you need to pony up at the end of the day, and if you don't have the liquidity, this can be a problem.
2007-01-06 19:53:20 · answer #4 · answered by Photog906 2 · 0⤊ 0⤋
If you have the correct info you can calculate how much income tax you will probably owe. Then find out at what rate the government is garnishing your paycheck. You should be able to make a reasonable estimate of how much over or under you would be.
Me personally. I would rather the government garnish less then more. I don't like giving the government an interest free loan. :)
2007-01-06 19:53:35 · answer #5 · answered by Ginger P 2 · 0⤊ 0⤋
i have a 2 year old and i work 7 hours and have to come home to her, i don't need allowence, i got a job.
2007-01-06 19:52:47 · answer #6 · answered by yagurlmaddy96 1 · 0⤊ 1⤋