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How many allowances should I claim to break even on taxes -----------

How many allowances should I...
How many allowances should I claim to "break even" on taxes?

--------------------------------------------------------

Currently I'm listed as Single 0 Allowances on my W4.
But we'll be filing as Married Filing Jointly.
Want to adjust allowances so we break-even (no refund) for 2010.
We'd rather owe a little than get a refund -- bigger pay-checks.

For 2010 --
My income = $100,000 (one job)
Wife's income = $0 (unemployed)
Interest income = $2,300 (CD)

No taxable investments.
Nobody can claim she or I as a dependent on their tax return.
No 401k, deductable IRA, FSA or HSA.
No adjustments, alimony, or education loan interest
No children, disabilities, and we do not own a home.
No unemployment compensation
We will be taking the standard deduction.

My recent pay-stub seems irrelevant since so has much changed.
I got a raise and got married this past year.
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Answered in 8 hours by:
12/8/2009
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified

Hello asking questions,

 

The 2010 tax tables have not yet been published, however, they are expected to be extremely close to the 2009 figures, so I will have to base my answer on the 2009 information which is availalble.

 

It sounds as though your total taxable income from your job and interest will be $102,300 for the year. The standard deduction for a married couple will be $11,400 and then you will be allowed personal exemptions of $3,650 each for you and your wife. This will bring your actual taxable income down to $83,600 for the year. Your federal tax on that amount will be $13,275.

 

On your W-4 form, if you fill it out as married with 2 allowances, they will withhold a total of $13,000 from your checks, and at the end of the year you would owe around $275 additional tax to be submitted with your return.

 

You may also request on line #6 of the W-4 form to have additional taxes withheld from each check in a certain amount. So if you would prefer to take care of that $275 throughout the year, then simply divide the $275 by the number of paychecks you receive each year, and enter that amount on line #6 of the W-4 form. This should then withhold just about exactly what you can expect to owe for the year.

 

If this was helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank you asking questions.

 

 



Edited by Merlo on 12/8/2009 at 1:24 PM EST
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Customer reply replied 8 years ago
This doesn't seem right.
Customer reply replied 8 years ago
Would like to try a different answer.
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
Verified

As your gross income is about $102,300

your standard deduction (MFJ) $11400

personal exemptions $7300 (for two persons)

taxable income $83,600

regular tax $13,275

making work pay credit - $800

and your estimated total tax liability is $12,475

So far the estimation above is correct.

 

What might affect your tax liability? Besides items you mentioned above - that might be health insurance premiums which are not included into your taxable income.

Also - estimations are made for 2009 - your 2010 tax liability (and withholding) might be a little less.

 

As you want to adjust your withholding to be a little less than your tax liability.

By filing W4 form as married - you will include deductions for your spouse. The more allowanced you will claim - less withholding will be from each paycheck. For $100,000 wages - if you file married with

-- zero allowances - your estimated federal income tax withholding would be $14,638

-- one allowance - your estimated federal income tax withholding would be $13,725

-- two allowances - your estimated federal income tax withholding would be $12,813

-- three allowances - your estimated federal income tax withholding would be $11,900

 

So far filing married with three allowances will match your objective. You need to be sure that you will owe not more than $1000 at the tax time to avoid possible underpayment penalty.

Let me know if you need any help.

 

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Customer reply replied 8 years ago

Hi Lev,

 

Thank you for your response.

 

When I run the "Life Events Advisor" at TurboTax (http://turbotax.intuit.com/tax-tools/)

for $100,000 and choose Marriage, it says I will save up to $6,816 (vs single).

 

Is that accurate? Will 3 allowances put that into my paychecks throughout the year?

 

Thank you again,

Robert

If you were single with the same income level $102,300 for the year - your total tax liability for 2009 would be $19,746

Compare with above liability estimation for filing jointly with your spouse $12,475

You see - the difference is close to estimations by TurboTax.

 

We need to differentiate tax liability and withholding.

if you file W4 form as married with three allowances - your estimated federal income tax withholding would be $11,900

 

Ask Your Own Tax Question
Customer reply replied 8 years ago

Ok... I think we're almost done...

 

So with W4 as Married 3 Allowances, should I expect an extra $262 per bi-weekly pay-check? Taking TurboTax's $6,816 estimate and dividing it by 26 gives you $262.

 

Will I owe at tax-time or will I still be getting a small refund?

I'd rather owe them than have them owe me.

 

Thanks,

Robert

I believe that TurboTax estimates tax liability and not withholding.

According to my estimations $19,746 - $12,475 = $7,271 - the difference is about $400 - so my wild guess is that TurboTax doesn't include making work pay credit.

 

based on My estimations - if you file W4 form as married with three allowances - your estimated federal income tax withholding would be $11,900 - and you will owe ~575 at the tax time.

 

If you prefer to have a small refund - use two allowances on the W4 - your estimated federal income tax withholding would be $12,813 - you your estimated refund will be ~$340.

Please be aware that withholding is estimated based to equal payments. If you will be paid bonuses or not equal payments - your withholding might differ.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Last question -- should I expect that extra $262 in each bi-weekly paycheck next year then?

"extra $262 in each bi-weekly paycheck" - should be in compare with something.

 

If you file W4 form as single with zero allowances as you states at the beginning - your estimated withholding with $100,000 pay would be $21,146

 

compare with filing W4 form as married with three allowances - your estimated federal income tax withholding would be $11,900

 

so the annual difference $9246 - assuming 26 pay periods - $355 less withholding with each paycheck.

 

Lev
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