Finance Questions? Ask a Financial Expert for Answers ASAP
Hi from Just Answer. Thanks for asking for me.
Withholding is a personal thing, with some people wanting a big tax refund to work with in February, and others who want to pay in little or nothing, since they need money currently.
There isn't a formal limit to the number, but IRS now looks at withholdings and can override the W-4 choice if someone claims too many.
As long as someone can support their claimed number, IRS will allow it. Things like child tax credits and earned income credits go into the calculation, so it's possible a single mom with two children at home working for the minimum wage might be eligible for 8 or more exemptions. Same thing for people who worked more than one job, who were employed for only part of the year, etc.
Best to tell people to claim an accurate number, and fine tune it if they wish. The W-4 goes into the calculation, which is more complicated than in years past, but it's the best way.
What would you recommend for myself? I have a wife and two dependent parents and want to pay as little taxes monthly as possible.
Also, what is the range for exemptions? 1-15?
Since it is year-to-date, I would use the IRS withholding calculator to assist in the math. http://www.irs.gov/Individuals/IRS-Withholding-Calculator is the link. I suggest this because it will take into account your withholdings for the year to date. That will drive how much you should claim for the remainder of the year to full pay.
The range is higher than that. I just did a test on the IRS calculator and the figures I used came back with over 20 exemptions. It really depends on your facts for 2013.
oh wow... thank you for your time and explaining how exemptions work
the calculator is going in my bookmarks