tax question?

Question

Although Vicki is entitled to four withholding allowances, she claimed just one on her Form W–4.

a. Why would Vicki claim fewer allowances than she is entitled to?

b. Is this procedure permissible?

c. Will this affect the number of personal and dependency exemptions Vicki can claim on her Federal income tax return?

Answer 1

Because Vicky wants to have more money taken out of her paycheck on a weekly basis NOW...and then claim all 4 deductions at tax time. She'll get a MUCH larger tax return that way. It's definitely legal. That way, she also has very little chance of having to PAY the IRS at the end of the year.

If she takes all 4 deductions on her W-4, she'll get a larger paycheck because less tax will be taken out on a weekly basis...

BUT

at the end of the year, she may OWE money to the IRS.

If she only takes 1 deduction now, her paycheck will be smaller every week....

BUT

she'll be able to claim all 4 at the end of the year, which will mean the IRS will most likely owe HER money, so she'll get one big check in the form of a tax return.

Answer 2

a. More money would be taken out of her paychecks
b. Yes
c. No