Claimed 3 on W4, Got W2...no fed. taxes taken out!?

Question

Hi, I just got my W2 today and noticed that no federal taxes were taken out all year for 2006. In Jan 2006, I changed my W4 from claiming 0 dependants to claiming 3 dependants. I figured that with 3 kids, I needed the money more during the year. I also recieved a raise in Jan 2006 and because my check only went up about $50 per bi-weekly check, nothing clicked that something could be wrong. As far as looking at my check stub, I get direct deposit and the stub is sent in the mail. When I get it I file it away. Well, I learned a lesson. But my question is, should changing my dependants to 3 make my employer take out 0 for federal taxes? Or did they screw up somewhere?

Answer 1

You did not mention your income level. Assuming you file 'head of household' with 3 kids, your standard deduction is $7,550 and your 4 exemptions (1 for you and 1 for each kid) total $13,200. That means you can earn $20,750 before you have a tax liability. If your income is less than that, $0 withholding sounds right. You may also be eligible for up to $3,280 of EIC. This is a refundable credit, which means you can claim the 'refund' even if you did not have tax withheld.

Answer 2

If the box that shows Federal Income Tax Withholding is blank, I would immediately question someone in your Human Resources department.

No, changing your dependent status would not result in $0 federal taxes, unless you make $0.

I have an aunt whose company (an architectural firm) did this and every employee was responsible for paying those taxes. Some were even penalized. Not only were the taxes not deducted in the correct manner, the company was also not paying social security and other employee taxes.

Unfortunately, it sounds like you are probably going to be paying Uncle Sam before April 15th.

Answer 3

Each exemption lowers your income by $130.77 for tax purposes. Therefore $392.31 is subtracted from your gross pay before figuring the tax using the percentage table.

Don't forget that exemptions and dependents are not the same. If you are married, have 3 kids, and no other job, then the number of exemptions would be 6. You get 1 for yourself, 1 if you are married have one job and wife does not work, 1 for wife, 3 for kids.

If your w-4 has 6 then $784.62 was subtracted.

Answer 4

you can get Circular E from IRS that is what employers use to determine how much to withhold from employees pay or see your employer. Be careful re the response that said you can file Head of Household, can not if you are married & good that you learned you need to watch this issue during course of the year. Also compare your W-2 to the print put you get yearly from Social Security to insure you get proper credit.