Would this affect us at income tax time?

Question

My husband is currently claiming 1 on his W-4. He gets a bonus check at the end of this month. He wants to change his claims from 1 to 4. So it will be less taxes taken out. Would this affect us when its time to file taxes.

Answer 1

Changing his withholdings will NOT affect the amount of taxes taken out of a bonus check! Bonuses and other irregular payments are subject to statutory withholding at 25%, plus Social Security and Medicare at the usual rates. Some states also have statutory withholding for bonuses, I believe that CA requires either 8% or 10% for example.

The law was changed a couple of years ago to stop this type of abuse. Most taxpayers who pulled that stunt wound up with large tax bills at the end of the year. That forced Congress' hand to change the law to stop that practice.

Answer 2

You end up paying the same money for taxes, it's only when you pay it, and whether you get more in your paycheck and less in a refund or have to pay when you file, or less in your paycheck and extra back at tax time.

So yes it will affect you at tax time. If you would have had a $600 refund and you have $400 less taken out for the year, your refund will drop to $200. If you would have had a $600 refund and you have $800 less taken out over the year, you'll owe the other $200 when you file your return.

Answer 3

If less taxes are taken out, then you will have to pay them at the end of the year when you file taxes. If you want to make a big payment then, go ahead and change it.

Answer 4

It could mean that he will not pay enough taxes and will end up owing when he completes his return.

Answer 5

Of course it will affect you when you file your taxes. Since less is being withheld then it will mean either a smaller refund or you will owe more.

Answer 6

Very good possibility. You might have to pay later.

Answer 7

it is OK to do that, as long as when you file your tax return, you claim the correct amount of dependents.