withholding

[aevans1206]

According to the W4 worksheet, I should be claiming 5. I currently claim 0 (I know, I know...free loan to the government). I am going to change my withholding ASAP, but am wondering if I'm setting myself up for bad things by claiming 5? Anyone have any advice on that?

[skydivingchic]

Maybe try gradually increasing your withholdings. Instead of claiming 5, maybe try 2 or 3. See how big a refund you get after a full year, and then up it again if you are comfortable. Also, I've seen a few calculators that allow you to put in tax already withheld for the year, so those would be a good way to check your standing periodically to make sure you aren't underwithholding.

[aevans1206]

Thanks! I was thinking of starting with 3. I withheld 2 last year and still got almost a thousand back (duh, maybe that's a clue!). I've seen a calculator on the IRS web site. It's rather involved and my husband no longer gets a paper paystub when he switched to direct deposit (he can view it online, but not at home for some reason due to his employer's system). Ahh well. 3 it is.

[disneysteve]

I'm confused. First you said you were claiming 0, then you said you claimed 2 last year and got a thousand back.

If you claimed 2 and got under $1,000 back, I probably wouldn't go over 3, unless you don't mind owing a little at tax time. Claiming 5 sounds like it would be too much.

Also keep in mind your state return. The past 2 years, I owed Federal but got a refund from State, so I need to balance that in my planning.

[aevans1206]

For the 2007 tax year I claimed 2. From January of 2008 until now I've claimed 0.

I usually get both a state and fed return. The state return is generally under $100, so I'm not fooling with that one. It's the fed one I need to worry about. I also know that I will claim a few thousand in student loan interest this year, which will I'm sure act similarly to my tuition deduction (which I will no longer have). There have been years where claiming zero, I've gotten a $3000 return. That's totally absurd, as I understand from this web site! I'm a bit embarassed at myself for deciding to claim 0 this year.