My husband and I have a disagreement. He claims "0" on his w-2, I claim "1". What is better? We both work. We both make generally the same amount. We have no children. And we both put into retirement (although not the maximum). He said that we get more back at tax refund time than I because he claims "0". (Which I believe). I just dont believe that having the maximum taken out on each paycheck is worth the refund in the end. He's the mathmatical guru of us both, and I just am so confused. Someone please explain the benefits of claiming "0" so I can let him do it his way!!!!
2007-02-23 00:36:54 · 8 answers · asked by Anne E 2 in Business & Finance ➔ Taxes ➔ United States
Your husband is in fact correct on this one. By claiming "0", he does and always will continue to receive a big refund check at the end of the year. This is because as you stated earlier, "he is having the maximum amount taken out of his paychecks."
I as well choose to do things the way your husband does, simply because at times it is hard for me to save during the year, and I enjoy receiving a nicely sized return check at the end of the year.
A disadvantage of claiming "0" is that that extra money the government is taking from our paycheck every 2 weeks is earning interest for them until it is time to pay up. Whereas you on the other hand have disallowed them the opportunity to do that with your money by claiming your "1".
From an investor's point of view, it is "financially" smarter to claim the "1" and invest the extra money you get each pay check yourself instead of letting the government earn interest off of your funds. Because that is exactly what they do with it.
2007-02-23 00:54:43 · answer #1 · answered by businessman 2 · 1⤊ 0⤋
He's right that claiming 0 results in more being taken out of each paycheck. If you have too much taken out, then you get it back as a refund - but that only means that you let the government use your money at zero interest for the year, before giving it back to you. The best amount to claim on W-4's is whatever lets you come as close as possible to breaking even when you file your return.
You could get a much larger refund if he had an extra $1000 taken out of his paycheck each month - your refund would be $12,000 larger than you're getting the way it is now. Somehow that doesn't sound like a good idea.
2007-02-24 15:51:54 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
I've always claimed "0" because it is like an instant savings account that you get back when you file your taxes. It takes a little while to get used to the smaller number on the actual paycheck, but it's nice to get such a big refund back. The key for us (me and my fiance) is to budget with what we're actually taking home then when the refund comes back there are more options with what to do with it. Sometimes we've put it in savings, once we went on a long-weekend vacation, or we've saved some and then spent some. It's like our reward for staying on a tight budget for the rest of the year. I would say though once you have kids that it would not be wise for either of you to claim "0" anymore.
2007-02-23 00:51:35 · answer #3 · answered by 2 Teach Is 2 Touch Lives 1 · 0⤊ 1⤋
Claiming zero and getting a bigger refund check economically is a very poor idea. Why allow the Gov't a zero % loan on your money. That being said, if you take the refund check and invest the money then by all means do it. He should make his dependant higher and increase retirement, you really won't see much of a change in your paycheck. Please tell me you do not pay to get the refund faster or a refund loan.
2007-02-23 00:58:35 · answer #4 · answered by Anonymous · 1⤊ 0⤋
All it is:
Claim "0"---more taken out of paycheck...more back at tax time
Claim "1"---less taken out of paycheck, less back at tax time and sometimes you actually owe....it all depends on how you like to do it, I ended up owing $100 every year when I claimed one and that is why I went back to 0.
2007-02-23 00:45:29 · answer #5 · answered by echc 3 · 0⤊ 0⤋
If you're getting much of a refund, one or both of you shoud raise your withholding exemption number to reduce withholdings. Anything more than a couple hundred coming back is TOO MUCH!
I'd much rather have the money in my hand on payday, and even owe a couple hundred on Tax Day than get any refund at all. It's MY money and I want it NOW.
2007-02-23 01:07:09 · answer #6 · answered by Bostonian In MO 7 · 1⤊ 0⤋
here's the bottom line give me your money for a year and i'll give you back the same amount but i'll put the money in the banks and collect interest and keep the interest what is the sense of giving somebody your money to use. refunds are for dummies there is no reward. my goal is to get back or pay 0
2007-02-23 00:52:04 · answer #7 · answered by GENE M 2 · 2⤊ 0⤋
i agree with bluexstar i claim 0 also and im married with 1 child..We get alot more back at tax time this way..
2007-02-23 00:53:02 · answer #8 · answered by woodsytattooman 2 · 0⤊ 1⤋