Tax Withholding

Extreme examples have included one single individual who was claiming 9 dependents and another who indicated they were tax exempt for a salary of $20,000.  Tax exempt status is only allowed if all your withholding is returned to you in your tax refund, and expect the same to occur in the new year.  Dependents cannot claim tax exempt status if they expect earnings that exceed $1000.

Under-withholding results in tax penalties, and over-withholding results in delayed income that could pay monthly expenses. It’s a delicate balance keeping just the right amount withheld from your paycheck.  Employers seldom question or check what their employees select.

You can change your W-4 at any time. You are allowed to claim yourself and individuals who live with you and depend upon you for their financial support once.  A dual income family must decide who will claim the eligible dependents; for example, the husband might use one child and wife the other; orhusband taking both children and wife only claiming herself, etc. 

If you have cash income, or other income that isn’t subject to withholding, you can make estimated tax payments or decrease your exemptions if you have employment where income is subject to withholding.  If you typically receive a large refund each year consider adding an eligible exemption and give yourself a larger paycheck throughout the year.

 ~Joyce Lash—FIELD SPEC II - Families