Should I change my income tax withholding when my baby is born?

Question

She's due this September.

What are the advantages/disadvantages to each option?

Thanks!

Answer 1

It really doesnt matter if you change it at all.

The thing is-

1. When you list dependants, less money is withheld from your paycheck, but you'll owe money (or have a much lower return) at the end of the year.

2. When you list 0 dependants, which I highly suggest, more money is withheld from your paycheck but you will get a higher tax return at the end of the year.

Its up to you!

Answer 2

Change your withholding now.  The deduction counts fro the entire year.  The advantage is that you get more money from each paycheck.  The disadvantage is you get a smaller refund.

Answer 3

Most people take advantage of the withholding but they don't understand why...

Basically, Withholding is a function of saving. You take a percentage of your weekly / monthly income and set that aside based on your tax bracket so when April rolls around you don't come up short when its time to pay your taxes.

Good Luck

Tropper

www.dontdiepoor.com