OT sort of..need your opinions

Discussion in 'Budget Board' started by Mellie2162, Dec 16, 2006.

  1. Mellie2162

    Mellie2162 <font color="blue">It means that a friend is watch

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    Ok so because you are all so smart when it comes to finances this is the first place to go for answers. My question is this. On your paychecks throughout the year do you claim more or less dependents and how does that work out for you? Right now we claim less and usually get a nice refund at the end of the year, however, we are getting to the point where that extra in the pay would be nicer and so we are considering changing what we claim to more and just dealing with the taxes at the end of the year. Do you really get much more back during the year to make it worthwhile? Is this a stupid question?
     
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  3. Disneyfan63

    Disneyfan63 DIS Veteran

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    Hi,

    Because I work for the Federal government (and have little or no state tax withheld from my pay), I can only speak knowledgeably about Federal tax withheld. Generally, the more withholding exemptions you claim on your Form W-4, the less tax will be withheld; and the fewer exemptions, the more tax will be withheld. You can't claim more withholding exemptions than you actually have (pets don't count as exemptions because they don't have Social Security numbers). Keep in mind, though, that the IRS can impose an estimated tax penalty, even if you are due a refund, if your Federal tax withheld is less than 90% of your tax liability for the year. Go to for a look at Publication 505, Tax Withholding and Estimated Tax.
     
  4. lisaross

    lisaross DIS Veteran

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    you are paying the same in taxes - you get a refund when you over pay throughout the year! So if you under pay you'll have to pay back or you could break even.

    Most peole would say to not get a lump sum back because you could be earning interest on your money or using it etc. BUT i think if you are not a good saver - this is kind of a forced savings.........

    lisa
     
  5. kellia

    kellia DIS Veteran

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    We usually claim a couple less than we can just so we are sure that we won't have to pay anything at the end of the year. I have a home daycare, so I don't have any taxes taken out of my pay. I usually have way more write offs than I make, but I'd rather be safe than sorry!

    I know it is my money that we are getting back, and we could have accrued interest if we were saving it ourselves, but it is still nice getting something back!
     
  6. imsayin

    imsayin DIS Veteran

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    My favorite tax scenario is to have a small amount due when I file (as long as I don't incur penalties). I hate the idea of loaning my money to the government all year long, interest free. I know many people say that a tax refund is the only way they can save, but IMO, that is lame. It is just as easy to have a direct deposit into a savings account than a direct deposit to the IRS.
     
  7. Mellie2162

    Mellie2162 <font color="blue">It means that a friend is watch

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    Well thanks for all the opinions. I knew I would get some different sides if I came here and that is what I wanted. :thumbsup2

    Our thing is I guess is that we are not savers and at the end of the year all of our taxes ends up going to bills, so my thought was why not claim the amount of dependents we have and actually get what we need through the year. I just don't want to end up with a huge IRS bill at the end. :confused3 I dunno...guess we will have to chew on this one for a bit.
     
  8. disneysteve

    disneysteve You have to enjoy life, not go

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    If you go to the IRS website (irs.gov), you can find a withholding calculator to figure out where you stand and what to claim to minimize your refund.
     
  9. tikilyn

    tikilyn DIS Veteran

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    Can someone tell me what we are doing wrong? My dh income this year is 70000.00. We claim M with 2 dependents and were still getting over 5500.00 back from the irs. My dh does have a lot of work related deductions but still. The irs is getting 500.00 a month from us and it stinks (even though I do like getting that check).
     
  10. disneysteve

    disneysteve You have to enjoy life, not go

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    Well, the simple answer is that what you are doing wrong is not claiming enough dependents. The long answer is you need to go the the IRS site and use their witholding calculator to figure out how many dependents you should be claiming for the most accurate witholding. Unless you expect some significant change in your status for 2007, he should immediately at least increase to 3 or even 4 exemptions. That large a refund is ridiculous. That's almost 8% of his income. Better for it to be in your pocket all year.
     
  11. lisaross

    lisaross DIS Veteran

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    i think this is because of the taxes we pay on our mortgage - maybe my husband should add more dependents also to balance this out.......

    lisa
     
  12. Darcy03231

    Darcy03231 DIS Veteran

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    I have mine figured so that I only get a small refund (less than $500) back each year. We're good savers and I hate to give the IRS my money to play with interest free for a year. It took a couple of years of playing with the dependents to get to this, but it works for us.
     
  13. Mellie2162

    Mellie2162 <font color="blue">It means that a friend is watch

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    Thanks that is a great tool, I am going to sit down with DH tonight so we can figure out what we need to change. We also get a very large refund at the end of the year and really could use it more now.
     

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