What should i claim on W-4 if i'm married and have one kid?

Question

Is 7 right? because thats what i found out from "paycheck calculator". And is there any harm claiming 7?

Answer 1

If your spouse does not work and your child will be under age 17 as of Dec 31, 2008 that is the correct number according to the IRS and other calculators.  If you're not comfortable with it, drop to 6 or 5.

Claiming 0 as another poster suggests is foolish.  You'd be giving the government an interest-free loan for upwards of 16 months.  That's just plain DUMB, IHMO.  The goal is NOT to receive a fat refund when you file but to come as close to breaking even as possible.  After all, it's YOUR money; why lend it to the government without any benefit to yourself?

Actually, if you can discipline yourself to set the money aside in an interest-bearing investment account, it makes MORE sense to shoot for a tax DEBT at filing time as long as you keep it to less than $1,000.  Penalties for underpayment don't kick in until your debt exceeds $1,000 (there are other ways around it but most wage earners can't benefit from them) so that way makes the MOST sense from a purely economic standpoint.  That way your money works for YOU for as long as the law allows and NOT for the government.  I shoot for a $900 debt at filing time each year.  If I wind up with a refund, I'm not doing my homework very well!

Answer 2

When filling out an application for employment, alway claim ZERO!  Then when you do taxes in spring, you will get money back.  Who on earth told you 7?  The most you can claim is 3.  You, wife and kid.  3!  Replace the batteries in the calculator.