Howdy... I am on OPT and in my pay stub it shows the No. of Allowances allowed is 01 and for my friend it shows No.of allowances is 02. They deduct more amount from me for Federal and state tax. Both of us are single. When I checked with my employer, he said when the no.of allowances is 01, they will deduct more and I will also get more while I file the tax return. Can you please educate me on how the no.of allowances works and generally what % of Income you need to pay as tax when you are on OPT ?

Thanks
Samy

I do not know what you are referring to as OPT.

I can explain the exemptions. The IRS allows one exemption for each person and one for each dependent. Sometimes two will be claimed if the employee wants less tax withheld and knows he will not have to pay that much at the end of the year.

Each deduction lowers the amount of tax withheld.

The deductions are figured on Weekly, biweekly, semimonthy, monthly, quarterly, semiannual and annual pay according to your pay schedule and the method used.

If you are single with a weekly pay period each deduction is worth 67.31. That means if you claim one deduction it is 67.31. If you claim two deductions it is 134.62.

If your check for the week is 500.00 and you claim 1 deduction than the deduction of 67.31 comes off before any other taxes are figured.

If your check for the week is 500.00 and you claim 2 deductions than the deduction of 134.62 comes off before any taxes are figured.

For a single weekly payroll the amount after the deduction which for one deduction would be 432.87. You would than use the percentage tables which are as follows:

51.00 to 198.00 the tax would be 10% of the excess over 51.00
198 to 653.00 the tax would be 14.70 plus 15% of the excel over 198.00
653 to 1533.00 the tax would be 82.95 plus 25% of the excess over 653.00

This means if you earned 500.00 a week, had one deduction which would leave the base wage for taxes at 432.87 the federal tax would be 14.70 plus 15% of the excess over 198.
432.87-198.00 = 234.87 X 15%= 35.23 14.70 + 35.23 =49.93 for federal income taxes.

Now if you earned 500.00 a week, had two deductions the base wage for taxes would be
500-134.62 or 365.38 base wage for taxes. So they still would be 14.70 plus 15% of the excess over 198.00. Which is 365.38-198.00= 167.38 X 15%=25.11. So you would have 14.70 + 25.11 = 39.81 for Federal income taxes.

If the bracket tables are used instead of the percentage method than the amount will varying a few dollars one way or the other.

This means that since you are paying less tax in you will have a smaller refund or if you owe you will owe more at the end of the year as you have less withheld.

It really comes down to do you want more in your check each week or more back at the end of the year.

Shirley

What is OPT?