What to claim on w-4?

Question

my husband makes about 42k a year and claims a 3 right now. We have one child. I just started home daycare and estimate I will make 16k this year. We dont want to end up owing the fed anything, but we also want as much money as we can on his paychecks. What should we claim?

Answer 1

Go to PayCheckCity, enter your data, and it will compute your withholding allowances:

http://www.paycheckcity.com/W4/w4instruc...

Answer 2

Are you going to be making estimated quarterly payments on your own income?  Bear in mind, its likely you will owe more in taxes on your income than you would if you worked for an employer (as when you work for an employer, they pay 1/2 of the Social Security contribution, when you work for yourself, you pay the whole piece yourself).  If you are wanting to try to avoid making quarterly payments, then you should reduce his with holding to 0.  That may not be enough though- you really may want to consider buying an hour or two from an accountant ($75 an hour or so) and have them review your last year's return, and have them advise you on the right thing to do.  The last thing you want is to under with hold, then the IRS slaps you with under with holding penalties (Ive paid them before, oops).  Your goal should be to break even- no refund, but owe nothing either.

Answer 3

that depends ... do you plan to take a standard deduction or itemize - for example - do you have a home mortgage?

Answer 4

Continue to claim 3 on his w4 and you should make estimated quarterly tax deposits for what you earn.

Answer 5

Are you planning to make quarterly payments for your home daycare earnings, or expect his withholding to cover it?  If you make $16K on the home daycare, your additional tax over what he would pay if he had the only income will be somewhere between $5000 and $6000.  If you pay that in quarterly estimated payments, then he's fine claiming three and could most likely claim four if your child is under age 17.

If you aren't planning to make quarterly estimated payments for the daycare income and are expecting his withholding to cover what you owe, then cutting his allowances to zero wouldn't be enough, he'd need to have aabout an extra $33 a week withheld even claiming zero.

Answer 6

A good rule if you don't want to end up owing anything is to claim one less exemption than you're allowed. That way you'll almost always get money back from the IRS. My dad told me that when I got my first job and it's always worked for me.