Currently I am claiming my self as a dependent to my employer. I did this because I was told that I would bring home more money per paycheck but that I may have to payback some at the end of the year.

Does anyone have any input as to which is better? According to our financial manager, we can either claim 1 or 0.

ebaines

I assume you're asking about how many allowances to claim on the W4 form you submitted to your employer, right? I suggest you follow the directions the IRS provides on the W4, and see what you get. See: http://www.irs.gov/pub/irs-pdf/fw4.pdf

omega_red_08

I did that and I got 3. According to him, we can only use either a 0 or 1.

N0help4u

If you make over a certain amount then you have to pay taxes at the end of the year. If you make over that amount you want to have it taken out of your pay each pay so you don't end up owing taxes and not have the money.

If you are only making say $20, or minimum wage then you can do whichever you prefer.
Personally I like having the smaller pay check and getting it back with the EIC money (and stimulis when they do that) when I do my taxes.

N0help4u

If you are alone with no wife or kids or any other dependents then I am sure you would only come up with 1 or 0

ebaines

It may be that your financial adviser is recommending that you have additional tax withheld to make up for taxes you would otherwise have to pay through quarterly estimated tax payments - for example if you have income from investments (interest, dividends, capital gains) or other outside sources. Or if your wife works and makes more than you do - this can cause you to under-withhold taxes on your salary if you just follow the W4 directions. Without knowing your personal situation it's impossible for us to determine what the correct number of allowances is for you.

omega_red_08

Thanks you two. I was just wondering because I've been hearing lost of things about this. Some say it's better to get more from your paychecks and owe some at tax time. Others, say the opposite. Get less now and more at tax time.

My view is that I shouldn't be giving the government a tax free loan every year and then I get back some of what was always mine.

AtlantaTaxExpert

Omega:

I agree with your position about the interest-free loan to the government.

However, if you are a foreign national, then IRS regulations restructs you from claiming MORE than one exemption of your W-4.

This is done to ensure that enough money is withhdl from your pay to cover your income tax liability.

If you are a U.S. citizen, then go ahead and max out your W-4 exemptions.