My W-2 mentions 3 deductions but I now realize that it should be only 2.?

Question

My W-2 mentions 3 deductions because that's what I had mentioned on my W-4 to my employer, but I now realize that it should be only 2. Is there any workaround while filing returns? Otherwise I would be claiming an excess refund which I am not eligible to.

Answer 1

On your W-4, you tell your employer how much deduction to take based on what you expect to have to pay in taxes.

On your W-2, your employer tells you the dollar amount deducted based upon what you told the employer.

On your 1040, you tell the government how much you earned. Based on that amount, after deductions, you calculate your tax liability.

You then subtract what was deducted from your paycheck, which is on the W-2, from your tax liability as calculated from your 1040. If you had more deducted than you owe, you get a refund, If you had less deducted than you owe, you need to send the government more money.

You indicate you used the wrong deduction number when you completed your W-4. The net impact is less was deducted through the year than you needed to meet your tax obligation. So you will owe more or get a smaller refund than you expected. It's not a question of the government giving you more money because you had three deductions vs. two. Rather, the government took less of your money from each paycheck, so they have to return less.

Here's an example: Suppose you earned $100. If you claimed 2 deductions, $20 is withheld. If you claim 3 deductions, $30 is withheld. At tax time, you determine you owe $25 in taxes.

If you claimed 3 deductions, then you got $80 in your paycheck, but now have to pay $5 more in taxes. Your net is $75.

If you claimed 2 deduction, then you got $70 in your paycheck. You will now get a refund of $5, so your net is $75.

Most people prefer to have the lower amount deducted so the government doesn't get a year's float on the money. But there are some that like having the greater amount deducted so they get a big check in April. They don't understand the same could be achieved with a savings account that could be tapped whenever needed!

The W-4 is your estimate when you start working. The tax return is the actual number. You have nothing to worry about.

PS - Technically, there could be a penalty. But the government never charges someone the penalty for being one deduction off. The penalty is only levied when someone is being abusive - such as a single non-homeowner filer claiming nine deductions.

Answer 2

all that did was have too little in the way of taxes withheld from your paycheck. file the return with the correct information and pay any taxes you owe. the IRS may raise a flag as to why you put 3 deductions down on your w-4, but if it was the first time, it was a honest mistake, and you pay the taxes you owe, you should not be penalized. and file a new w-4 with the employer when you go back to work Monday.

Answer 3

If you claim the correct number of deductions on your taxes, then it will all balance out and you will not receive an excess refund. When you go back to work, change it from 3 to 2.

Answer 4

If you claimed an extra deduction, then they took out less than they would have if you had just claimed 2.

But if you are getting a refund when you do your return, then you ARE entitled to it - your return preparation doesn't have anything to do with the number of allowances you claimed on your W-4.

Answer 5

You file a W4 with your employer telling them how much to withhold from your taxes. The withholding exemptions you claim don't necessarily have any correlation to the exemptions that you can claim on your return. Due to my tax situation I claim 2 withholding exemptions although I only claim 1 on my tax return.

When you file your tax return, you claim whatever exemptions you are entitled to. It does NOT matter how many you claimed on Form W4 that you filed with your employer.

The exemptions on Form W4 affect the amount of tax withheld. As long as enough tax was withheld to cover your total tax liability after all other credits and payments are taken into consideration there is nothing for you to correct. If you get a refund, your withholding exemtions are sufficient to cover your tax liability; again there is nothing to "fix."

Form W2 does not show how many withholding exemptions you claimed. At least I've never seen one that did and the official IRS form does not have a place for employers to put that information.

Answer 6

Your employer should ask you to fill out a new W-4 each year but most don't. Just fill out a new one. The higher the number of exemptions the less they hold out so you may have to pay, not get a refund. You do need to change it to the correct number. The idea of withholding is based on an ability to pay or in other words you pay when you have the money to do so or each paycheck. If not enough money was held out, you will pay. If too much was held out, you get a refund. You are entitled to any amount you overpaid. I don't know if there is any penalty but I doubt yours is enought to worry about.

Answer 7

I would not waste more money on a lawyer. I am sorry but you have a bill that you have to paid regardless of what the W2 form indicates. Yes, you should ensure that a new corrected W4 is done at your place of work. You have until April 15, 2008 to pay the tax bill. Get your state refund back and use it for your federal if you can. Make payment arrangements with the IRS.

Answer 8

what ultimately matters is the deductions you claim on your tax return. Your employer withholds tax based on what you claim on your W4 form. If you think the withholding is incorrect, file a new W4 with your employer. Good luck.

Answer 9

As long as you are honest on your return you are OK. If you did not have enough withheld there may be a penalty, but one deduction shouldn't be enough to generate a penalty.