Tax Question.....Help?

Question

On my W-2, I put 5 allowances per the work sheet provided. I am hearing alot of mixed comments. Some say that the more you allowances you put the less money you will get back. Then I hear that is does not matter since I am a single mother. Does any one know what is the best way to get a high return? I tried calling H & R Block but all the offices are closed.

Answer 1

Do you want more money today or tomorrow is really the key. The more deductions you claim on your paycheck, the less tax is taken and the lower any refund you would get back would be.

You don't state your income level or number of children, so you need to consider if you would qualify for the EIC or not, which would reduce the amount of tax you would owe and increase your refund (to the point you get it all back).

Answer 2

If you put the amount of allowances the worksheet allows, you're right, you won't get a large refund - instead of waiting to get the money early the next year, you'll get it spread out through the year in your paychecks. It's the same amount of money - the only thing that changes is when you get it.

If your goal is to get a large refund, have them take out an extra $500 a month from your checks - then you'll get an extra $6000 back when you file your return - $500 times the 12 months. Doesn't sound like a good idea? I didn't think so.

Answer 3

As with most tax questions - it all depends. On your income level, on the number of deductions, etc. Your general premise is correct, the higher the number of exemptions, the less that is taken out each paycheck. And you really want it to come out close to even at the end of the year. If you don't have enough taken out each week, you could find yourself with a big tax bill. If you've had too much taken out, you've given the US government an interest free loan all year.

Answer 4

From you paycheck social security and medicare taxes are withheld at 7.65%.

The two withholdings that depend upon what you put on your W4 are federal income tax and state income tax. If you put more allowances on your W4, your employer will withhold less federal and state taxes from your pay check, but your social security and medicare deductions don't change.

With 5 on W4, no federal tax will be withheld if your weekly check is less than $430.

In January 2008 your employer will send you a form W2. It shows your total income and amounts withheld for various accounts (SE tax, federal tax, state tax...).

You will need to file your federal and state income tax returns in 2008 by April 15, 2008. The returns will show your total income (from W2) and your total federal and state taxes on that income (these tax figures has nothing to do with what you put of your W4).