I have 6 Children but at my employment I only claim 2 dependents, is it wise to just claim two or all 6.?

Question

I like getting the return at the end of the year. Should I and my wife claim all of the dependents now or just claim each 2 on our paychecks. I make about 32,000 a year and my wife makes about 37,000 a year. Should we claim all 6 now or not. Thanks

Answer 1

The more dependents you claim, the less tax is withheld. The less tax withheld, the less refund you'll get at the end of the year.

If you like getting a large refund, then don't change your dependents.

If you like a large refund, but don't mind it being a little smaller so that you'll have more take-home pay each month, then change your dependents to 3.

It's really a matter of money management. If you'll spend the money more responsibly (or be more likely to save it) if you receive it as a lump-sum, then don't change your dependents. But, if you're willing and able to use the extra funds each month towards debt reduction or savings, then increase your W-4 dependents; you'll earn more interest (or pay less interest on debt) in the long run.

Answer 2

What you are doing is a voluntary savings scheme. You will have the deduction for 4 kids at the end of the year.

You may do better by claiming the deduction and putting that money in an interest bearing account. You need to make sure you dont spend it though, and it may mean you will have tax to pay instead of a refund.

You should be able to check your last few years tax return and see what difference claiming the deduction during the year would make.

Answer 3

If you claim all of the allowances that you're entitled to, you'll get more in your paycheck, but a smaller refund. You'd probably still get some refund, if some or all of the children are under 17 so you get a child tax credit for them.

It's your call - the total money in the long run comes out the same, it's just when you get it, with each paycheck or lend it to the government interest-free for the year, then get it at the end.

Answer 4

Ideally, you do NOT want to plan your finances so that you receive a "refund" after you file taxes. By doing this, you are giving the Federal Gov't an interest-free loan. They send you your own money back, after keeping it for over a year, and pay you zero % interest. Understand? Great deal for them - rotten for you. Take EVERY deduction you're entitled to and get nothing back, or pay a small amount at the end. You can then benefit from having this extra money by SAVING - NOT SPENDING it!! I could continue, but there's just no time!!