[aimeebarry]

I am 24, Single and own no property. I make about $52,000 a year and would like some advice on how to file. Right now I am 0 for Federal and 1 for State. I am looking to take home less on my checks to get more of a refund at the end of the year. Am I filed correctly? Or should I be at 0 Fed and 0 State?

[ScottGem]

You mean how should you fill out your W4? Is that your question?

Do you like loaning money for free? Because that's what you are doing when you increase your withholding to get a large refund. If you want to save money, do an automatic deposit to a savings account. Don't lend Uncle Sam money without interest.

[aimeebarry]

Yes I mean for my W4. So your saying to have less taken out so that I get more on my checks since my money is sitting with the govt. until they refund it?

[ScottGem]

For as long as I can remember, my federal tax returns have fluctuated at give or take less than $100. Sometimes I have to pay, most of the time, I get back a small refund.

This is because I use the W4 to increase my take home and decrease my withholding. Uncle Sam will not lend me money interest free so I see no reason to do that for them.

[AtlantaTaxExpert]

Scott has it right.

ANY refund, either federal or state, is an interest-free loan to the government.

You should strive to withhold as little as possible, and write a check as close to $1,000 (the maximum allowed without incurring an under-withholding penalty) when you file and mail your return on 15 April 2008.

[aimeebarry]

Ok, I think I get it, but I'm not 100% sure. So your saying I should change my withholdings to get more back on my checks.. So for example, change my state withholding to 0 to maximize my takehome pay? One thing I want to avoid is paying at the end of the year. I didn't understand the $1000 thing you were talking about. Can you clarify? Sorry =) I really appreciate your help.

[ScottGem]

The IRS doesn't like it when their cash flow is limited. So if you wind up having to pay more than $1000 there may be a penalty.

You shouldn't worry about paying as long as it's a small amount. If you are concerned put the extra amount in your paycheck in a saving account and you can draw on it to pay your taxes. At least will be getting some interest on the money.

[AtlantaTaxExpert]

Scott hit it on the head.

[aimeebarry]

So I need to change my withholdings then to 0 state & 0 fed? Also, will it affect me differently since the tax year is almost over? Should I wait until Jan.

[ScottGem]

You might want to consider getting Quicken or Microsoft Money. I believe both have tax planners that cn advise you what to set your W4 for. If you set everything to 0, that will cause the maximum withholding. You want to increase exemptions to decrease withholding.

[AtlantaTaxExpert]

Try File Taxes Online - Do Taxes FREE - File Taxes With TaxACT.

I have found the Tax Planner portion on the TaxAct software that I use to be very good. The website may offer free use of similar software on-line.