Tax withholdings question: What should I claim?

Question

I am currently working and claim '1' for myself but I have a lot of debt that is collecting interest right now. I figure if I change my tax exemption status at my job I will get more money which I can use to pay off my debt, which is collecting about 18% a year in interest. My question is what number should I claim to get a lot of money back. What is the maximum that I can claim. I will have money put away in the bank to pay at the end of the year so that's not a concern. Plus I will have tax a lot in tax write offs from my side business that I have.

Answer 1

your choices are:

A. claim 1 through 25
B. claim 50
C. file exempt

these are all legal based on the IRS publication 15 tax table
dated January 2007. Remember the numbers above represents withholding not dependents.

Answer 2

If you are single, and don't have any dependents, staying with 1 would be correct.

It isn't legal to claim exempt when you are not (you can be fined for doing that) or to claim more allowances than you are entitled to.

Where your question gets tricky, and doesn't give enough info to give a good answer, is your mention of your side business. If your writeoffs there are more than your income, so you'll show a loss on that, you might be entitled to claim additional allowances. But then unless you can make a good case that you were TRYING to make money on the side business and just didn't succeed this year, you run the risk of the IRS disallowing the losses by considering the side business as a hobby and not really a business.

As long as you have paid in an amount within $1000 of what you owe, or 100% of your total tax liability for the previous year, you're OK. If not, you are subject to penalties when you file even if you pay all that you owe with your return.

Answer 3

do you have kids if not being at 1 is good for you if you have kids like 3 go with 0 that will help