Question about W4 and allowances... (payments, owner, employer, paycheck)

[jasonc06]

So I usually put 1 allowance on my W4. But now that I have a new job, my HR asked me and said I can put more than 1.

I did some research and it seems she is correct, but I have no idea what number to put.

My salary is 120k in NJ. I'm single, no dependents. I do own a house (4 family), and have a home business (website) also, this website doesn't give me much income, since it's on its start up age.

Can anyone help?

[NJFillet]

IRS Withholding Calculator

There are two types of people:
#1 Wants the biggest tax refund they can possibly get, at the expense of giving the government an interest-free loan throughout the year. This person will pay more taxes with every pay, but likes the psychological boost of getting a big federal tax refund.

#2 Wants their paycheck to be as high as it can be every pay period. They do not want to give the government an interest-free loan and do not see a big tax refund as a windfall.

The difference in your paycheck can be hundreds of dollars per pay, especially at your salary level, depending on other factors (home ownership, property/state taxes, donations, interest payments, etc.)

Using this calculator will help you maximize your paycheck if that's your goal. It will determine the amount of allowances you need to claim so that you pay just the appropriate amount of taxes every pay period, nothing more. If you claim less allowances, you will pay more taxes each week, but get the overpayment in the form of the tax refund. For example, if you choose 2 allowances, your paycheck will be lower, but you are allowing the employer to withhold more of your income each pay, and as such your tax refund will be higher. If you choose 10 allowances, your paycheck will be higher, and your employer is withholding less of your income each pay. but since you're paying close to the correct amount of taxes due, your refund wont be as high.

If you own a home, pay property taxes (especially in NJ!!!), give to charity, etc., it would be in your best interests to use the calculator and figure out how many allowances to claim, especially with your salary level, you want to make sure you're getting as much of it as possible.

Most people view the tax refund as a gift...and that's probably how it was designed to affect people, but its not a gift, it's your money. It really means you overpaid taxes every pay period and so the gov't was allowed to hold and use your money, interest free, for a year.

I hope this makes sense.

[spencgr]

Originally Posted by jasonc06

So I usually put 1 allowance on my W4. But now that I have a new job, my HR asked me and said I can put more than 1.

I did some research and it seems she is correct, but I have no idea what number to put.

My salary is 120k in NJ. I'm single, no dependents. I do own a house (4 family), and have a home business (website) also, this website doesn't give me much income, since it's on its start up age.

Can anyone help?

Put whatever you want. The more allowances you put, the more money you have in your pocket every month; but the larger the check you will be writing come April 15th.

[jasonc06]

It totally made sense, thank you very much for such an explanation.

[MItoBH]

I personally file 0 so that the most tax is taken out (which I don't miss), but get a healthy tax refund back in February. I don't mind giving more money away spread out through the year. It sucks paying more tax to the government during tax time.