How many allowances should I take on my W4?

Question

I am single, I have 1 depoendent, I can claim head of houshold & the child tax credit. If I fill out my W4 according to what is true, I can claim 6 allowances. Is this a bad idea? I never seem to have extra money to pay more taxes at tax time. I almost rely on a refund. How do I "break even" so that I don't have to pay at the end of the year but my paychecks are still substantial?

Answer 1

Use the withholding calculator at the IRS website, you need to have your most recent paycheck stub. Enter in the information that it asks for and the calculator will tell you what adjustment you need to make on your W4 to break even, with you not owing, nor getting a refund back.

http://www.irs.gov/individuals/article/0,,id=96196,00.html

Answer 2

If you want to be absolutely sure you don't owe at tax time, you can claim one or two less allowances than the worksheets tell you. They'll take more out each paycheck, but you shouldn't owe at the end, and will probably get a refund.

Answer 3

To come close to breaking even, claim 1 exemption for every $3400 in deductions that you plan on having using last years taxes as a guide. Also include pre-tax deductions like 401(k), flexible spending accounts, and health insurance. Adjust accordingly for any tax credits that you are entitled.

Answer 4

Claim as the form has you calculate it. It's generally in the ballpark, so you'll neither owe too much, nor get a large refund, come tax time.

Answer 5

Best bet is to fill out the worksheet and claim the number that gives you.

There will never be a perfect break even, you'll have to revise each year as things change.