I should add that my wife doesn't work, but will be starting a job in three weeks. Should I change my withholding from single to married? If so, how many should I claim? I like the idea of getting more in my check every week, but I don't want to get whacked next April. Thanks in advance for your answers.
2007-08-30 00:15:28 · 5 answers · asked by Failure to communicate 3 in Business & Finance ➔ Taxes ➔ United States
I agree with the answers to wait until December to change your withholding in 2008. Since your wife will work several months this year, you may not be in a lower tax bracket than you are now.
In December, do your taxes roughly and see if you are overwithheld, and then adjust your W-4 accordingly.
2007-08-31 02:41:37 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
Since your wife is not working, you can claim her as a dependent, so change your W4 to married with 2 exemptions. When your wife starts working, her employer will deduct taxes. She will have to provide a W4 and she can claim 0 exemptions if you don't change your W4 after she starts working.
To maximize your take home pay and minimize lending money free to the government and getting a large tax refund requires some planning, which you can't do until you know what the two of you will earn together.
If you are good money managers, there is a neat strategy you can use to maximize your income and still satisfy the IRS. The tax law is based on the assumption that amounts withheld by your employer, regardless of when withheld, are paid to the IRS evenly over throughout the year. You can use this to earn interest income on your income tax payments.
You claim a large number of exemptions and have your employer withhold only a tiny amount of income tax. You put the amount that would normally be withheld into a savings account to earn interest. Near the end of the year, early November or late October, you file a new W4 and have the employer withhold a large amount in December, which you can specify on the form. This may be most of your pay and should be large enough to prevent you from paying a tax underpayment penalty. What you don't get in pay you take out of the savings account.
At the end of December you again file a new W4 for next year. Be sure to do that or your January pay will also have the same huge deduction as in December.
The IRS assumes that the large deduction in December has been paid evenly throughout the year. Meanwhile, you have earned interest on the tax you would have been paying all year. This only works if you can save the money. if you spend it throughout the year, you may have to starve in December. Before I retired I was claiming 19 exemptions though the year and had most of my tax deducted in November and December of each year. I earned several hundred dollars of interest.
2007-08-30 08:02:32 · answer #2 · answered by Anonymous · 2⤊ 0⤋
I'd leave it alone at least until the end of the year - your taxes probably won't change a lot. As for next year, if she's working also and you are making anywhere near the same amount, you probably should continue to have taxes taken out at the single rate, at least until you have some time as married and see how your taxes will work out. If both people are working, taxes aren't that much different for married than single.
2007-08-30 09:43:28 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
There is no requirement to make the change. You should wait until the end of the year and make any change based on the 2007 tax returns.
2007-08-30 12:22:28 · answer #4 · answered by ? 6 · 0⤊ 0⤋
Yes.
2007-08-30 07:21:11 · answer #5 · answered by ladyhawk8141 5 · 0⤊ 0⤋