Question re tax allowances for single people

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wiivile
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Question re tax allowances for single people

Postby wiivile » Tue Jan 14, 2014 9:02 am

For single people (with no dependents)... how many allowances do you claim on your tax return? Technically, since I'm single, I'm supposed to claim 2 allowances according to form W-4 (1 for myself and 1 since 'no one can claim me as a dependent'), but I have the option of taking 0 or 1 allowances.

What I don't understand is that I've been told that if I do take 2 allowances, I'm at risk of having to pay a tax underpayment penalty on April 15 because I didn't have enough tax withheld. How can this be, if the form W-4 specifically instructed me how many allowances I can take?

I don't like the idea of taking 0 allowances, because you're basically then giving the government an interest-free loan to get your money back in April.
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djrez4
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Postby djrez4 » Tue Jan 14, 2014 11:06 am

wiivile wrote:For single people (with no dependents)... how many allowances do you claim on your tax return? Technically, since I'm single, I'm supposed to claim 2 allowances according to form W-4 (1 for myself and 1 since 'no one can claim me as a dependent'), but I have the option of taking 0 or 1 allowances.


You get to choose the number of allowances you take. More allowances means less withheld; the government assumes that you will receive more deductions and credits when you file your return. I file married-jointly and take one allowance. My early calculations show I'll be getting a refund this year, so I could probably take two allowances if I wanted.

On the other hand, when I completed my W4 last year, I didn't know I was going to itemize deductions. That may change the calculation entirely.

wiivile wrote:What I don't understand is that I've been told that if I do take 2 allowances, I'm at risk of having to pay a tax underpayment penalty on April 15 because I didn't have enough tax withheld. How can this be, if the form W-4 specifically instructed me how many allowances I can take?


You probably won't have to pay a penalty.

Generally, you will not have to pay a penalty for 2013 if any of the following apply.

The total of your withholding and estimated tax payments was at least as much as your 2012 tax (or 110% of your 2012 tax if your AGI was more than $150,000, $75,000 if your 2013 filing status is married filing separately) and you paid all required estimated tax payments on time.

The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time.

Your total 2013 tax minus your withholding and refundable credits is less than $1,000.

You did not have a tax liability for 2012 and your 2012 tax year was 12 months, or

You did not have any withholding taxes and your current year tax less any household employment taxes is less than $1,000.

http://www.irs.gov/publications/p17/ch04.html#en_US_2013_publink100032429

I'm guessing that if you have a deficiency at all, it'll be less than 10% of your overall tax bill. Just send in a check.

wiivile wrote:I don't like the idea of taking 0 allowances, because you're basically then giving the government an interest-free loan to get your money back in April.


So, take one allowance instead of two?

The instructions give you a basis to estimate how many allowances you should take. If you didn't have enough withheld last year, the smart thing to do would be to decrease your number of allowances. If you make the same mistake two years in a row, I think the IRS has every right to encourage you to avoid making the mistake again.
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otter
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Postby otter » Tue Jan 14, 2014 4:07 pm

+1 what djrez said...

And remember you can always change your w4 during the year. There have been many years where I saw in November or December that I had likely already paid my income tax liability, so increase allowances accordingly(don't go above single-9 because your employer will contact the IRS). I call it getting my tax refund early. Usually though, I try to make it so my tax refund/amount owed is +/- $100.
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Postby dickey1331 » Wed Jan 15, 2014 2:16 am

I usually withhold 3 and I come out a little on top. Since Im in the military my taxable income is quite low.
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Postby MemberSince99 » Wed Jan 15, 2014 6:58 am

I claim 1, and pray they don't demand more than they've already taken each year. And they just spend it so wisely, always more money for Pakistan but we can't "afford" to fix our problems at home. But that's another issue. I do resent their legalized extortion of my income, the only difference between them and the mob is they will put me in prison for not complying rather than kneecap me. Otherwise, it's pretty much extortion of money that goes to a criminal enterprise.

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Postby djrez4 » Wed Jan 15, 2014 8:38 am

That's a bit harsh, member.

Taxes are a part of living in a society. We have collective needs and need to pay for them. I'll grant you the fact that the government doesn't always make the best choices with our money. That doesn't obviate the need for taxes. The solution to money mismanagement is not to eliminate the money. It's to get better managers. Your state is a perfect example right now.
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Postby MemberSince99 » Wed Jan 15, 2014 12:22 pm

Understood, djrez, I really didn't mean to upset you. If I felt I was taxed fairly (and I don't given my rate is much higher than the rate of Obama and Romney who make a WHOLE lot more for example) and that we weren't wasting so much of what is taken on things that I feel are ridiculous, it wouldn't bother me. I have no problem contributing to society's needs - I do have a problem with paying a much higher rate than people who have much higher incomes pay it's BS pure and simple, and I have a problem with all the waste, as you mentioned. Tell me about it I know they waste a lot.


But I have no problem with the general concept I have a problem with their execution of it. It certainly leaves much to be desired.

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Postby darkguy2 » Wed Jan 15, 2014 1:19 pm

I live in NC and this previous year I actually made a decent amount of money so now I am seeing how horrible my states income tax is. I have claimed 1 for my federal and 0 for my state this entire year. I will be getting around $1K back for federal so I will be increasing my deductions for next year. For my state it looks like I will owe $100. I do not see how this could be possible with zero deductions.. I am so glad they are changing the tax laws this year.
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