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We claim zero...
We claim zero on our federal and state taxes. Why is this not a good idea? Or is it a good idea??? I am clueless and we just really dont want to owe each year....
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Jenn,Originally posted by jenn_1022 View Post
It depends on your unique situation. Oddly enough, there are times when even zero is not enough. Some folks claim zero plus take out extra withholding on top of that each payday in order for things to come out correctly at the end of the year.
The best thing to do would be to run through the IRS withholding calculator to get a better idea.
Link to IRS web site and withholding calculator -
It does depend on your circumstances.Originally posted by jenn_1022 View Post
Generally, though, if you get money back from the Fed & State Income Tax returns every year, then that is money that you could have been using toward savings, or paying down debt or even paying current expenses and not accumulating debt in the first place.
Essentially by claiming "0" deductions you make a interest free loan to the government -- they have the use of your money and you do not.
Whether you use the extra money (say by claiming 1 deduction for yourselves each) to accumulate more money or to pay down bills or to keep current with everything, you're usually better off than letting the goverment have it for free for the year.Comment
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The lower the number claimed the more taxes taken out. The higher the number the smaller amount withheld.
We claim 9...two adults, two children with gross incomes from $48k to 62k. We still get money back.
Max you can claim is 10.My other blog is Your Organized Friend.Comment
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If you have things that you can deduct from your income (i.e. student loan interest, etc.) then you should be able to claim more deductions and keep the money for yourself.
Like2plan is correct, you should try out the IRS's calculator.Comment
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As stated above, the best you can do is claim in a way where you break even with the gov. so that you can use your income to pay down debt or earn interest through investments.Comment
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Depends we claim single, zero and are married. Sigh, sometimes it just sucks to owe, and I usually make a payment in January to get us really close.
Don't give the government a loan, but yes it does feel better to get a $100 refund than owe $5k (which we did one year).Comment
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If you claim 0 then you will pay more money each month in taxes, but will receive a larger refund at the end of the year. The down side to this is that money you are giving the government is interest free. You could have done something with that money but you have allowed the government to have it all year.
I am currently claiming single and 0 myself. This may be foolish on my part, but I do like getting $3k back from taxes. I perfer to think of it as a forced savings. I strongly dislike the idea of having to pay money aswell.Comment
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MY wife and I both claim married. We claim "0" and withhold at the higher single rate. I also have an extra $10 taken out per pay for federal taxes. This gives us a huge tax return check that we use for vacations that are paid in cash.
I know we are allowing the government to use our money interest free, it works for us. If we didn't, then the money would get used for something else or we wouldn't bring ourselves to take it out of an account to use it.Last edited by Angio333; 06-29-2008, 08:15 PM.Comment
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You can claim more than 10.Originally posted by creditcardfree View Post
We claim 12. Kids, home, medical expenses, charity, etc. We usually are pretty breakeven. There is just no way I want to give the IRS a dime more than it is due! I rather invest that monthly.
Heck, you can claim 20 if it is correct. (We claimed more in the past - had more deductions).Comment
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I just had to add, in the past if you claimed 10 or more exemptions, your employer was required to report this to the IRS. These days, this is no longer true.
Likewise, if it was a correct amount of withholding, it was just a formality. It didn't really do anything but discourage people from not withholding enough.Comment
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Thank you for all the advice. I noticed that we claim zero and single. I would like my husband to change that to married, but will it actually increase the money we receive each paycheck?Comment
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My dh and I also claim zero. I know, I know, we are giving up interest. But the reality of the situation is that we view it as forced savings that we use to pay down large chunks of debt at a time. Two years ago we got 3k back and we paid off a car and a couple other smaller debts. It works for us.Comment
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I just changed mine from single to married and I am taking home more.Originally posted by jenn_1022 View PostComment
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Yes it will. My advice is that if you're both employed, one of you claims married and the other single. If one of you is stay-at-home, the one who's working should probably be able to claim married OK. But there is a possibility you won't be withholding enough.Originally posted by jenn_1022 View Post
If you're worried you'll owe, put the extra money you see in your paychecks into a savings account--don't touch it; think of it as money to pay taxes. If you need to pull it out at the end of the year and pay the IRS, you can do that and then adjust your withholdings for the next year--no pain. If you don't need to pull it out because you don't owe the IRS anything, you've got yourself a little nest egg!Comment
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