Should I change my W-4 for more exemptions?

Question

Right now I have 1 exemption on my W-4 (it's for line B: I'm single and have only one job), but now I would like to change it for line A (No one else can claim me as a dependent). But I was told by a coworker that if I add another exemption then I would have less taxes taken out, but at the end of the year I could actually end up owing money. This year I got a refund (241.00 refund for making ~5,000.00) and I'm just worried that if I change my exemptions then I will end up owing money at the end of the year instead of getting a refund. Just so you know, I'm a 21 year old college student with a part time job. Thanks.

Answer 1

Your co-worker is right. The more exemptions you claim, the less tax is withheld from your paycheck.

Ideally, you would like to come in at zero at tax time, neither owing the government nor having provided them with an interest-free loan. This turns out to be very difficult to do.

The IRS provides an on-line calculator to help you figure your exemptions. Find your latest pay stub and go to http://www.irs.gov/individuals/article/0,,id=96196,00.html and follow the instructions.

Answer 2

The link below is an o-line calculator from the IRS to determine the best number to claim on your W-4. It will estimate your refund/amount due if you follow the advice given. That said, $5,000 is less than the standard deduction for a single. Even if you are a dependent (as a full time student, you may be your parent's dependent) you should have no Federal income tax liability. You will probably get as much as they withhold back.

For what it's worth, lines A to H is not actually part of the W-4. They are a worksheet attached to the W-4. Lines 1 though 10 are the actual form. Of those, lines 8, 9, and 10 are filled out by your employer.

Answer 3

First, you may change your W4 at any time. You are correct that it is not retroactive and will take effect with your next paycheck. Second, what you claim on your W4 makes no difference with how you file your taxes. The W4 is for estimating withholdings only. You may still file as single with no dependents and, if you cannot be claimed as a dependent on someone else's tax return, you can still take your own exemption. Third, this will affect how much you get on your refund. With zero exemptions claimed they took out a higher level of taxes which will get you a larger refund. When you change to one exemption they will take out less taxes, you will get more in your paycheck, and your refund at the end of the year will be lower.

Answer 4

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It does not matter what your W-4 says. The W-4 is used to determine withholding out of each check. If you were claimed as 0 and wanted to be 1, you can not go back since they already withheld the money from your checks. In the end, it ends up the same because you will get a refund if you overpaid on your tax return. The W-4 is just used to estimate what you will owe, the tax return reconciles any over or underpayment.

Answer 5

Here is the IRS site for students. I always claimed zero so that I'd have $ at tax time, sorta like a forced savings! But then IRS is making $ off you during the year. Claiming just 1 exemption kept me pretty even, so at tax time I would not pay, just receive a small amount. Be careful on getting lots of $ right now, cuz it WILL result in you paying taxes eventually.

Answer 6

More Deductions Less Taxes

Answer 7

Bob W and Steven F are giving you correct advice.

Answer 8

it could, possibly but if you are not good at saving money the tax refund is the more convenient way to go