What should i calim for my taxes?

Question

I m single male with no dependents. Last year I grossed about 50k, plus about 10k more in rental income. Im starting a second job and I m thinking about claiming 2 on the tax form and changing my first jobs tax form to 2 as well.

I figure by claiming zero I m giving the gov. a tax free loan and if I claim 2 I d see more in my paychecks and get a tiny return if one at all. However I dont want to end up owing anything.

Does this make sense? Am I right or wrong?

The additional income from this second job will be very minimal. I ll be bartending for $7 hr plus tips. I ll only claim the hourly wage. By the end of 2007 I will have grossed less than $1000 on the books at the second job. Also I usually file that I ve done between $4 and $6 k in repairs to the property to offset the rental income a little.

Answer 1

There is no way to answer your question from the information given. The rental income has several factors that could influence the proper answer. The new job income could also change any answer give based on the level of income that you expect to receive. Without reviewing your prior years tax return and determining what if any of those factors were subject to change the answer give would be a poor guess at best. You are thinking in the correct direction you just don't have enough information to answer correctly.

Answer 2

If you have 2 jobs, even if you claim just 1 on each W-4 you'll probably end up owing if your income from the second job is anything substantial. And if you aren't making quarterly payments for the rental income, you will almost surely owe when you file since just on that your taxes will probably be around $2500 and you won't have had anything withheld toward that.

Claiming 2 is guaranteed to get you in trouble at tax time if you don't file quarterly and make quarterly estimated payments. Since you don't say how much you expect to make on your second job, or even if it's self-employment or a job as an employee, it's not possible to give you more exact info.

Answer 3

Normally, I tell people to claim one exemption on their W-4 for every $3400 in planned deductions (either itemized deduction or standard exemption plus personal exemptions).

Since you have the rental property, you have extra income which throws off the equation. Do you plan on making estimated payments to the IRS for the net rental income? If so, then follow my formula. If not, then deduct your net rental income from your deductions.

Also, having the second job will throw a wrench into my equation since the income will be taxed at your marginal tax rate. However, the tax withholding will be taxed as a separate job. Meaning, there won't be much tax withholding from your second paycheck.

Answer 4

you are right. Some people like the big refund but you've got a great handle on why that's not necessarily the way to go. I use turbotax and they have a feature that will actually calculate what you should claim so that what you owe is closest to your withholding. You can try that if you're unsure.