Need More pay/less tax return advice

[smooper]

Thanks to my wife and posters here, i need to increase my weekly takehome pay by 100-120 bucks. Normal tax return is 6-7k. How do i go about this by changing my W-4, and what do i change. Is there a way to figure the increase in weekly takehome? I'd ask HR, but where i work its probably the worst advice i could get. I can change the W-4 through a company website, so thats not the issue. Give me a clue! Thanks!

[JBinKC]

Is this 6-7 K a refund or total income. What is the source is it? Overwithholding from paycheck or from earned income credit?

[disneysteve]

http://www.irs.gov/individuals/artic...=96196,00.html

This is the IRS witholding calculator. It will help you figure out the proper number of exemptions to claim so that you don't get a big refund or owe a lot at tax time.

Certainly, if you are getting $6,000 or $7,000 back, you need to change your exemptions. You do that by contacting your payroll person and filling out a new W-4.

One common misconception: The number of exemptions you claim has nothing to do with how many dependents you have. Many people think if they have a family of 4, they can't take more than 4 exemptions, but the two numbers are totally unrelated. You can claim 0 or 4 or 10, if that's what it takes to make the numbers work.

[smooper]

the 6-7k is my usual refund. Caused by claiming 0 all year and the claiming all at the end.

[JBinKC]

I do taxes for people and I find it hard to believe by claiming zero you would get such a high refund amount without also receiving a refundable credit on your return(like earned income credit).

BTW An exemption is worth roughly $3000 in deductions. You can also get advance earned income credit if you apply for it.

[smooper]

Yes, i definately know nothing about income taxes! All i know is i make 50k ish a year and recieve about a 6-7k tax refund. Maybe its not possible to figure a way to get 120 bucks a week extra in my pay. A trip to payroll is in order, although reluctant to do it.

[disneysteve]

Originally Posted by smooper

Yes, i definately know nothing about income taxes! All i know is i make 50k ish a year and recieve about a 6-7k tax refund. Maybe its not possible to figure a way to get 120 bucks a week extra in my pay.

It is absolutely possible, and very easy to do. Just increase your exemptions by 1 or 2, as discussed above.

[JBinKC]

to get that amount back you would have to use 8 exemptions.

[smooper]

i tried a calc. and 8 sounds about right. thanks for getting back to me jb!

[MonkeyMama]

As a tax accountant just wanted to throw out a "simple" calculation. An exemption is around $3,000 (slightly higher, but rounding down for ease). If you know this and your tax rate, it is pretty simple overall.

If you need another $400/month, and your tax rate is 25%, then here is what you do.

$400/month x 12 months = $4800/year. Divide by 25% tax rate = $19,200. Divide that by $3,000 (exemption amount). =6, so you would need about 6 exemptions to get that $400/month back in your paycheck.

This is not an exact science, and I DO recommend the IRS withholding calculator, but with such a large refund you would be pretty safe taking 6 or 7 exemptions and seeing how that affects your check. & if you still want to squeeze out a little more you have wiggle room.

Logically this works because an exemption is around $3000 and every deduction you get is translated into how many exemptions you get. IF your total deductions are $30,000, you have 10 exemptions ($30,000/$3,000 = 10). I kind of wanted to lay it out because most people do not get this in the least. It is a good trick to know.

Tax credits are different because they are not deductions, they actually lower your tax due. So the calc is a little different. WIth tax credits you divide by your tax rate first, and then divide by the exemption. For example, I get a $2000 tax credit every year on top of my regular deductions. So I divied $2k by my tax rate (15%) and then by $3k, and I get 4 more exemptions every year. I actually use this quick calc every year to claim my withholdings and it has served me pretty well. I round up because I rather owe a few hundred than get a refund, but you can round down the final result if you want to ensure you get a refund. But I do have to say being a tax accountant and knowing all the latest tax rates, exemptions, deductions, laws, etc., overall I think you are safer going to IRS website and checking it out.

If the IRS says you can take 8 exemptions, and you are going from 0, and you want to know how much that is - it is 8 x $3k = $24,000, & multiply by your tax rate - that is essentially how much more you would get in your check every year. You can then decide how big you want your refund to be and how many exemptions you really want to take.

Ah, I just hope I helped and didn't confuse you all more.

JBink - It is very common in high-tax states. The average middle-class homeowner around here probably gets a $50k income tax deduction just for their state taxes and mortgage. So I don't find that strange at all. We have a pretty modest mortgage for the area and we have 10 exemptions before we even consider the kids or any credits.

[smooper]

Great info. Dumb, question- is there a certain time i have to turn this form in by, and if i do want to change my exemption amounts after that, how late into the new year can it be done? Thanks, getting ready to do this soon, thanks to everybodys help!

[MonkeyMama]

You can chnage it whenever - if you change your mind every week you can. It just takes effect when you give it to your employer. & they may not like it if you change your mind every week - LOL. It just won't be reflected in your paycheck until you do it is all.

[smooper]

OK, I just needed to know so i can start at 7 and then be able to adjust accordingly. Your help is appriciated!

[smooper]

Just an update, I took 7 exemtions-it only took two weeks to show up on my check, and it was a 125 take home increase( this was with a pay that included 5 overtime hours), so 7 was pretty much right on the money.