Single guy number of exemptions (or allowances) on W-4, what's the right number?

[lootpacman]

Hi,

I am single young professional. I have been wondering about the # exemptions to claim on a W-4.

My W-4 currently says:
Federal: 3
State: 1

I recall someone saying in the past to up it from 1 exemption because my tax returns were pretty huge and I could be using that money during the year. For example, $3k+ just for federal tax return.

Tax season is here and would like to start 2017 on a good foot. Any suggestions?

Cheers,
LPM

[puck36]

You would need to talk with your payroll department to see what the magic number is.

For me, single, I it set at 0 that way I don't have to pay in. I only get back less than $2,000.

[GoodSteward]

The risk of playing with that number is you don't know how the year will go, or what laws will change by next tax season. You also may not realize how close you are to the next tax bracket (AGI not just gross), and end up getting hurt at the next tax year from a raise or bonus, etc.

My question is how are you getting back so much if you are single and only claim yourself? Do you have a lot to itemize? Still a student? If the scenario isn't a safe bet on being able to keep your tax situation to where you know you would get a refund, then I wouldn't bother. Technically, you are loaning the government money that you could be earning interest on during the year. That's the "why you don't want to get a refund" argument, however, that can also bite back hard if you are not careful. I know plenty of people who owe because they didn't pay in enough, and if you are not sitting well in the bank you can't just make it up at once. Now you have a debt, with interest.

[lootpacman]

The risk of playing with that number is you don't know how the year will go, or what laws will change by next tax season. You also may not realize how close you are to the next tax bracket (AGI not just gross), and end up getting hurt at the next tax year from a raise or bonus, etc.

My question is how are you getting back so much if you are single and only claim yourself? Do you have a lot to itemize? Still a student? If the scenario isn't a safe bet on being able to keep your tax situation to where you know you would get a refund, then I wouldn't bother. Technically, you are loaning the government money that you could be earning interest on during the year. That's the "why you don't want to get a refund" argument, however, that can also bite back hard if you are not careful. I know plenty of people who owe because they didn't pay in enough, and if you are not sitting well in the bank you can't just make it up at once. Now you have a debt, with interest.

My tax person itemizes a lot it seems (rent, transportation, food etc). I did get a raise and bonus this year (same as the previous year) and I received a smaller refund in 2016 and she said it was due the increase in number of exemptions. So it is safer to change the allowances/exemption to 1 or 0?

I may try doing my own taxes this year with one of the online tax software and see what the difference is.

Thanks,
LPM

[GoodSteward]

My tax person itemizes a lot it seems (rent, transportation, food etc). I did get a raise and bonus this year (same as the previous year) and I received a smaller refund in 2016 and she said it was due the increase in number of exemptions. So it is safer to change the allowances/exemption to 1 or 0?

I may try doing my own taxes this year with one of the online tax software and see what the difference is.

Thanks,
LPM

Few questions. Do you own a business or are you self-employed? I would imagine not since you are asking about how to have your check taxed. If that is the case you can't use those items to itemize. Your situation sounds fishy to me. Only self-employed or business owners can claim the things you mentioned, and then only for business purpose. I would get a second opinion about what you should do with another tax person.

[terri77]

It took me a couple of years to adjust mine. Worked two jobs & had both set at 1 exemption and ended up owing. Next year set the second job exemption to 0, owed less that year, but still owed. Set both to 0 exemptions the following year & that was the break even/get a little back mark.

[Petunia 100]

My tax person itemizes a lot it seems (rent, transportation, food etc). I did get a raise and bonus this year (same as the previous year) and I received a smaller refund in 2016 and she said it was due the increase in number of exemptions. So it is safer to change the allowances/exemption to 1 or 0?

I may try doing my own taxes this year with one of the online tax software and see what the difference is.

Thanks,
LPM

Umm, what? Your personal rent, transportation, and food are not deductible expenses.

The "right" number to claim on your W-4 is whatever gives you the results you want. If you are still getting a large refund, bump up your exemption by 1 again.

[lootpacman]

Few questions. Do you own a business or are you self-employed? I would imagine not since you are asking about how to have your check taxed. If that is the case you can't use those items to itemize. Your situation sounds fishy to me. Only self-employed or business owners can claim the things you mentioned, and then only for business purpose. I would get a second opinion about what you should do with another tax person.

busy week...my follow up below:

I'm glad you asked, that's the part that has been nagging in the back of my head. I don't own my own business or anything like that, just a regular salaried employee.

I'm hoping I won't get screwed by using this person to prepare my taxes (referred to me by a family friend). So I'll probably try H&R block or the closest professional tax person.

[lootpacman]

Umm, what? Your personal rent, transportation, and food are not deductible expenses.

The "right" number to claim on your W-4 is whatever gives you the results you want. If you are still getting a large refund, bump up your exemption by 1 again.

My current # of exemptions is set to 3 and that yields 2K+ for combined state and federal tax refunds.

[WannabeWealthy]

Confused

Hey everyone. Good discussion so far, but I have one major question. It looks like the majority of you are encouraging multiple exemptions. Unless you are a successful investor, I don't see why you should need that money. In fact, if you take too many, you may OWE money.

This forum is usually based around saving, or preserving money. My recommendation is to take ZERO or ONE deductions. Yea, this means the govt will take the most, but, you are essentially guaranteed a nice check every tax session, almost a forced savings account. It has always worked very nicely for me, and you get used to the minor difference in salary.

[creditcardfree]

The IRS has a calculator for you. Go to irs.gov to find it. I would also suggest actually looking at the instructions on the W4.

The higher the number you claim on your W4, the less taxes will be withheld for the year. So increasing your W4 will result in less withholding and more money in your pocket. Your tax advisor should also be able to give you some guidance.