I just completed my 2009 tax returns and want to increase my withholdings for next year so that I can get more of my money upfront in each paycheck rather than having Uncle Sam hold onto it until year-end. I went thru the W4 calculator on the IRS website and paycheckcity.com and I believe I entered the correct#’s based on my 2009 tax return and both were telling me that I should enter 11 in box #5 for my withholdings. In entering my #’s including predicted salary, I stayed on the more conservative side (the lowest wage I’d receive without getting any bonuses) so I’m hoping that 11 is fine given that so that I won’t have to pay anything. For the past few years, I’ve had my withholdings at 5 for both Federal/State. So, switching to 11 sounds a little scary to me. My situation is that I’m single, own a home/have a mortgage to pay, usually have about K in charitable donations, pay property tax about K/yr, own 2 cars (about 0 total for Vehicle License fees), no stocks/bonds. Hopefully that helps. I’m just nervous about making any changes and risking having to pay rather than receiving a refund which I’ve been getting for as long as I can remember. Thanks!
Does 11 sound reasonable for withholdings on my W4's as a single?
5 Responses to Does 11 sound reasonable for withholdings on my W4's as a single?
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It sounds very wrong (too many exemptions). Roughly you can estimate an allowance for every $4,000 you lower your gross income (so 2 or 3 for your house interest above $5,700 ZBA, 2 for your land taxes + charity, 1 for a regular IRA of $4000 or so) plus 1 for your self; so 5 should have been good, and maybe 6 or 7 will be right on. {Unless you are getting some special credits, then things change.}
How much of a refund did you get? {Less than $600 would be decent planning.} Better yet, how much was your total tax bill? Divide that by the # of paydays you have then go to irs.com and look up how many withholding allowances you must declare to have that amount withheld given your filing status (S). {aka Circular E in print form.} It is considered good tax planning if you owe the government a little for April 15. (Say max $360 [to be safe...IRS regs will tell you the real number] because that gives you some leeway for bonuses, etc. As long as you have the money to give to the IRS on tax day.)
P S Conservative in tax terms means you over estimate your income and the taxes to cover that amount. Have fun.
You could be penalized for claiming so many deductions should you end up owing taxes next year. I suggest you find some middle ground for the first year and see how that works out … say claiming 5.
Your employer is supposed to send to the IRS any W-4 that someone has put more than 10 exemptions. The primary reason is for the IRS to check on your history. If you owe money, the IRS will tell your employer to ignore your W-4. If you have been getting refunds, then the IRS probably won’t object.
By the way, vehicle license fees are not deductible unless they are calculated as a percentage of the value of the car.
I hope this helps.
Gary
You’re doing something wrong. Your "situation" does not justify avoiding tax withholding. You’ll wind up paying taxes AND penalties when you file. Just use the "Personal Allowances Worksheet" on page 1 of the Form W-4.
It would also help to know how much mortgage interest you pay.