TAX: Turbotax & Changing Exemption

[adaway]

Hi,

You all helped me out a great deal with personal finances early last year. With your help I determined that I would change my withholding to 2 (from 1) so that less can be taken out from my paycheck. Here it is tax time and I am not sure where to mark this on the 1040A form I am using on turbotax. Do the numbers on my W2 automatically reflect this change in withholding or do I need to input it onto my tax filings as well. Some how I think I am getting confused and thinking I need to change exemptions but none of the options apply to me to increase exemptions to 2 (assuming that it equals withholding?) I am single and have no dependents.

Thank you for your time and help.
-adaway

[creditcardfree]

Withholdings only apply to your W4. Since you claimed 2 this past year, less taxes have been withheld from your check than if you had only claimed 1. This is reflected in box 2 of your W2 that was sent to you recently in the mail.

You exemptions will be different. In your case, only 1 for yourself. This is the number that should be in box 6a and 6d.

The amount in box 2 of your W2 will show up on line 38 of Form 1040a.

If you still get a large refund, you may want to fill out another W4 with your employer to increase your withholdings again....maybe 3. There is a withhoding calculator at irs.gov.

Hope that helps!

[adaway]

Hey Creditcardfree...thank you so much for your reply! You gave me the information I needed. I somehow started to confuse myself and think withholding is reported by exemptions on the tax form.

I'm getting arnd 700 back with this filing...not sure if that's enough to up my withholding to 3 (not sure if last year's stimulus contributed to this refund) but I'll look into it further and make decision.

Thanks once more for you help.

[kork13]

Originally Posted by adaway

I'm getting arnd 700 back with this filing...not sure if that's enough to up my withholding to 3 (not sure if last year's stimulus contributed to this refund) but I'll look into it further and make decision.

I think (not positive) that upping it to 3 right now would make it so that you are underpaying, so you'd owe come tax time. One option is to wait until mid-year (July timeframe), then move it up to 3. You will have spent half the year with 2 witholdings (paying more), then for the rest of the year, you would be at 3 witholdings (paying less). That's what I'm doing this year, and it should help balance it out for you.

[noppenbd]

Originally Posted by adaway

Hey Creditcardfree...thank you so much for your reply! You gave me the information I needed. I somehow started to confuse myself and think withholding is reported by exemptions on the tax form.

I'm getting arnd 700 back with this filing...not sure if that's enough to up my withholding to 3 (not sure if last year's stimulus contributed to this refund) but I'll look into it further and make decision.

Thanks once more for you help.

I think you know this, but the number on the W4 is called "allowances" and the number on your 1040 is called "exemptions". They do not have to be the same, and you do not report your allowances anywhere on your 1040.

You can go to paycheckcity.com and enter your paycheck as it is now, and with 3 allowances, and see what the difference in federal withholding is. Then multiply the difference by the number of paychecks remaining and you can get an idea of how much your withholding will go down. If other things change your tax bill may change so this is not guaranteed to work, but it will give you an idea what the W4 change will do to your paycheck.

[adaway]

Thank you both for the additional suggestions.

I tried the irs gov calculator earlier today and it seems either 2 or 3 is suggested depending on the numbers I input. When it asked for retirement it wasn't clear to me if they were asking for what have so far contributed or what expect to contribute all year.

I did notice on last paycheck the increase in pay of 50 which I believe is from this year's stimulus so I think it's best to leave the allowances as is for now.

[creditcardfree]

The retirement figure on the government calculator is what you expect to contribute for the full year to pre-tax retirement, such as a 401K. Do not put any roth contributions into the calculator.

I'm sure the $50 may be due to the stimulus! The government calculator is already taking the new stimulus, making work pay, into its calculations. Try it again, with the correct retirement numbers.