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Old 09-15-2011, 09:26 AM
 
76 posts, read 188,850 times
Reputation: 27
Default Tax question does number of allowances matter?

Hi,
I'm currently working in NYC and living in NJ, my total number of allowances for both federal and state is 1, recently we had a baby and my wife has left her job, when I tried the w2 form online it shows my allowances can now be 5. However I mentioned this to an accountant friend and he said to leave it at 1, but I don't get why, he said the amount I'd get back would be little. Wouldn't changing the number to 5, bring back a lot more per paycheck? A
few hundred more? I understand if I leave it at 1 I might get a larger
return when I file but per paycheck wouldn't that get me more?

Thanks.
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Old 09-15-2011, 10:47 AM
 
Location: NJ
1,494 posts, read 2,963,628 times
Reputation: 911
Quote:
Originally Posted by soni2926 View Post
Hi,
I'm currently working in NYC and living in NJ, my total number of allowances for both federal and state is 1, recently we had a baby and my wife has left her job, when I tried the w2 form online it shows my allowances can now be 5. However I mentioned this to an accountant friend and he said to leave it at 1, but I don't get why, he said the amount I'd get back would be little. Wouldn't changing the number to 5, bring back a lot more per paycheck? A
few hundred more? I understand if I leave it at 1 I might get a larger
return when I file but per paycheck wouldn't that get me more?

Thanks.
If you claim a 5, you're check will be larger, but they may take out so little tax that at the end of the year you may OWE the irs and no one wants that. At least if you claim one you will likely get a large refund at the end of the year.
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Old 09-15-2011, 11:15 AM
 
1,769 posts, read 2,078,993 times
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This is really a personal choice. If you have enough financial discipline to be able to pay at the end of the year instead of getting a refund then you should absolutely claim as many allowances as you are allowed. People love getting a refund but a refund means that you gave the government an interest free loan on that money throughout the entire year. I should couch that by saying that I am one of the ones who actually give the government that interest free loan every year and get a nice refund by claiming 1 even though I could go higher.
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Old 09-15-2011, 11:54 AM
 
76 posts, read 188,850 times
Reputation: 27
Thank you both for the advice!
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Old 09-15-2011, 12:09 PM
 
Location: Martinsville, NJ
5,847 posts, read 6,315,654 times
Reputation: 3443
Quote:
Originally Posted by Raven1976 View Post
If you claim a 5, you're check will be larger, but they may take out so little tax that at the end of the year you may OWE the irs and no one wants that. At least if you claim one you will likely get a large refund at the end of the year.

What do you mean no one wants that? That's not true at all. I for one, and many people I know, prefer to UNDERPAY by a small amount all year long, and then pay what I actually owe when I file my return.

It comes down to a personal preference. Do you want to hang on to some money for a while longer, and pay it when you must, or would you prefer to let the government have an interest free loan of your money until you get your "refund". (I hate the use of the word refund here. It's not THEIR money that they are refunding, it's YOUR money that they are finally repaying, without interest.)
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Old 09-15-2011, 01:44 PM
 
Location: NJ
11,503 posts, read 19,867,869 times
Reputation: 4314
Quote:
Originally Posted by tdstyles View Post
This is really a personal choice. If you have enough financial discipline to be able to pay at the end of the year instead of getting a refund then you should absolutely claim as many allowances as you are allowed. People love getting a refund but a refund means that you gave the government an interest free loan on that money throughout the entire year. I should couch that by saying that I am one of the ones who actually give the government that interest free loan every year and get a nice refund by claiming 1 even though I could go higher.
Same here, and I'm ok with that.
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Old 09-15-2011, 05:06 PM
 
Location: Northern NJ/Amagansett, NY
3,794 posts, read 4,287,318 times
Reputation: 2544
Depends on your deductions. For someone with a big mortgage, more is better. My accountant has me claiming 9, which is the maximum allowed before showing proof. I have been doing this for many years without any problems, and with my mortgage, I still get a big refund check, so it all depends on your situation.
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