Should my husband and I lower our deductions on our w4, we need the money.?

Question

We had did the w4 at a single rate since jan/2008 but we are struggling. I wonder if I adjust them now and we get more money on our checks if enough tax would be taken out.

Answer 1

It will totally depend on your income and your deductions.  

If your situation in 2008 will be similar to your situation in 2007, take a look at how much tax you owed in 2007.  The safe harbor for 2008 is the amount of tax you owed in 2007.  If you pay in this amount and owe less than $1,000 on 4/15/09, then there will be no penalty.

You can make adjustments to your W-4 accordingly.

Answer 2

How much was your refund last year?  Generally, each increase of 1 allowance on your W-4 will give you $10 per week less federal tax withholding, or about $500 less withheld per year.  If you got a $1000 refund, technically you could increase your W-4 allowances by 2, but be careful as there are penalties if too little tax is withheld.  Since 2008 is half over, add up your federal withholdings now on your paystubs, and see where you stand, you can increase now, and then look at your situation again come next January and modify your W-4 again.  With 2 jobs it can get trickey, since neither employer knows really which tax bracket you are in.  Right now you are at single/0?  Then change to married/2. Go to www.paycheckcity.com, and you can see how much will be withheld and your new paycheck amount there, it is an easy to use site.