My employer allows us to "claim 10" 2x a year, what does this mean and are there any negatives to do this?

Question

Will it make any difference in my yearly tax return?

Answer 1

I assume your employer says it only allows employees to claim 10 exemptions on their federal tax withholding twice a year.

Claiming such a high number of exemptions would greatly decrease, if not eliminate, federal tax witholding on an employees' paycheck. As an employee, if you have too little tax withheld from your paychecks during the year, you will owe money to the IRS when you file your taxes. If you owe a huge amount, there may even be a penalty.

But let's be straight: Your employer is NOT permitted to have such a policy. The IRS requires employers to withhold based on the number of exemptions the employee claims on a form W-4.

Answer 2

Your employer has NO say in the matter whatsoever!

You may claim as many withholding exemptions as you are entitled to based upon your individual situation. That isn't necessarily related to how many dependents you have as the number of dependents is only ONE factor in calculating your withholding allowances. For example, if you had $50,000 in itemized deductions you could easily claim 10 withholding allowances yet have zero dependents.

If you claim too many withholding allowances you'll have a tax bill to pay at the end of the year. If that bill is more than $1,000 you may also face penalties and interest for underwithholding. (There are a few other "safe harbor" exceptions to the rule as well but that's another question entirely.)

At any rate, your employer is required by law to accept whatever you claim on your Form W-4 whenever you file an updated one with them and withhold tax based upon the most recent Form W-4. They can't "allow" you to claim extra, nor can they refuse to accept any Form W-4 that you file even if it claims 20 allowances.

If the IRS has a problem with your withholding situation, they'll be in touch with you directly. They get the data on withholdings from your employer when your employer files their payroll tax returns and if they think that something funny is going on they may ask your employer for a copy of your Form W-4 and then ask you to justify your position. If you can justify your withholding claims then you have NOTHING to worry about!

Answer 3

Are ;you saying that you claim 10 exemptions for two paychecks a year, so probably don't have anything withheld fro,m your checks? Strictly speaking that's not legal, since when you fill out w W-4 you swear under penalty of perjury that it's accurate, but if your withholding is accurate for the rest of the year, it probably won't hurt you much except that your refund would be reduced by whatever money doesn't get withheld for those two pays - it's not extra money for you, you are just getting it earlier, in a paycheck instead of in your refund. It's also possible that by having nothing withheld for those two paychecks, you would end up owing at tax time.

A refund is just a return of an overpayment. If you pay in less, you have less of an overpayment, so get less of a refund or none at all.

Answer 4

It is a violation of the law to claim more allowances than you have but it is rare that anything comes of doing so less you owe tax at the end of the year. If your withholding is more than $1,000 short of your tax liability you will be subject to both interest and penalty. If your tax liability is less than what you have withheld it is likely that nothing will happen.

Answer 5

My wife spent 17 years with the IRS and I am 64 and neither of us have ever heard of this term or anything like it so its effect on taxes is either going to be wildly illegal or nil.
And you posted the question twice.

Answer 6

This question has been asked twice. See previous question.