My fiance & I need help in deciding what to claim on his W-4 form.Please help (any tax accountants out there?)

Question

My fiance and I have a child that was just born this year. I was working until just a few weeks ago, but do NOT plan to go back to work. He is filling out a new Maine W-4 form and we are both confused as to how many he should claim. He owes for 2 past years of taxes and when we go to file this years taxes they will be taking his taxes, or at least most of them. As he was filling out the W-4 he noticed he can claim like 6 because we are not married, he is the only working parent of our daughter, and makes less than 50000.00 per year. I think he should just claim 3. One for himself, one for head of household, and one for the independant. Should he claim all the other stuff, like single parent making less than 50000.00 year? We do plan to marry this year but do not know when. It could even be next year. Please help!

Answer 1

If you made under $3500 for the few weeks you worked, and you lived together ALL year, he can claim you as a dependent if you don't get married in 2008, or if you do, you can file a joint return, so either way he can claim one allowance for you.  Plus one for himself, one for head of household (since he'll be claiming your child), and up to 3 for her - since he is her biological dad, he'll claim her and will also be eligible for the child tax credit for her.  So claiming up to 6 would be OK it might be better to claim 5 for federal, to be sure not to owe at tax time..  For state,   claiming 3 would be good, for the three people.

If you made $3500 or over gross, subtract one from the above numers, since he won't be able to claim you as a dependent.

Answer 2

There are two many variables to be able to give you a good answer.  One big variable is whether or not you are going to get married.  The total tax liability will go down quite a bit the year you tie the knot, especially if only one of you have an income.

< edit >

Judy is right about the possibility of him claiming you...with the caveat that your living together cannot violate local law.

Answer 3

Your question is one of personal preference so only he can answer it.  Does he want to break even - no refund and nothing owed at the end of year?  That determines everything.

If it were me, I would try to get the back taxes paid off before worrying about anything else.  The last thing you need it those hanging over your new family.  One good way to do that is to have a lot of tax withheld from his income, so he will get a large refund, which will go to pay those back taxes off.

Whether you do that or not, you sound like your wedding date is flexible enough that you would be willing to make it in 2008 or 2009 if there were a lot of tax difference.  They could very well be but you haven't given enough details to determine that.  If you are still unmarried on Dec 31 2008, either of you can claim the child as a dependent as a deduction, for the child tax credit and for the earned income credit.  

If his income is going to be in the Earned Income Credit "sweet spot" ($13K to $19K) or near it, I would stay single and let him claim the child because the EIC would be very large.

If your income is going to be in that sweet spot, I would stay single and claim the child myself.

If your combined income is in that sweet spot or a couple thousand higher, I would get married in 2008 and then you both claim the child.

If both of you already make more than the sweet spot separately, I would get married in 2008 because there isn't a whole lot at stake either way, tax-wise.

I hope you really consider getting those back taxes paid off, and keeping the W-4 allowances low (so withholdings will be high and refund to pay back taxes also high).