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While I don't expect financial/tax advice, I just wanted to see what is an appropriate number of allowances for a single person with one job and no kids or spouse or child maintainence to pay.
When I looked at W4 the first two lines under personal allowances want me to put "1" for each, so totalling 2 as the number of allowances.
However, I keep reading online elsewhere that 1 is the safest to choose if you are single with one job and that chosing 2 may require you to pay back debt.
Why would it require to payback tax if the tax form itself qualifies you for 2 allowances in the first place, I'm trying to understand this.
The W4 just sets the amount that is going to be deducted from your check to cover your tax bill at year end. Even though you are paying in each payday, the amount you owe for the prior year isn't fully determined until you file your tax return and determine how much you owe. When I was single, I claimed zero and most times got a small refund or broke even. If you claim too many allowances, they won't take enough money out of your check and you will end up paying when you file your return. It's probably better to err on the side of paying too much and getting a refund until you can determine the exact amount you want deducted from your check.
Ideally, you don't want to either overpay or underpay. Some people like getting a big refund, but you're far better off taking that money each payday and investing it rather than letting the IRS hold on to it interest free all year.
One thing you can also do is add an amount to be deducted on top of the allowance. So if you find 0 is too much and one isn't enough, you can do 1 with xx extra amount. It may take a year or two of filing your taxes to figure out the right balance.
But why would it need to be "finding the right balance" - I mean, if I make $50k each year and I have no deduction/other income or spouse or kids or investments, then essentially I should be paying tax based on the year's bracket/rates.
So electing two allowances (per the W4 form) should have no surprises. Last year I worked for 2 months as an intern and I think i chose 1 allowance and i got some money at the end of the year. This year, I just started a FT job and nothing else is likely to change. So as per the form, shouldn't I be chosing 2.
I don't understand why they'd allow this flexibility and leave people guessing on their tax liability
While I don't expect financial/tax advice, I just wanted to see what is an appropriate number of allowances for a single person with one job and no kids or spouse or child maintainence to pay.
When I looked at W4 the first two lines under personal allowances want me to put "1" for each, so totalling 2 as the number of allowances.
However, I keep reading online elsewhere that 1 is the safest to choose if you are single with one job and that chosing 2 may require you to pay back debt.
Why would it require to payback tax if the tax form itself qualifies you for 2 allowances in the first place, I'm trying to understand this.
Thank you
The W4 is only a way to estimate how much tax should be withheld. It does not determine what you will actually end up owing when you fill out the actual forms you file in April.
Using fewer allowances will cause more tax to be taken out of each paycheck. You may get a refund of excess tax withheld.
Using more allowances will cause less tax to be taken out. You may not have enough tax taken out and may owe more when you file your return. It is not "back debt" or "back tax". It is just tax.
But why would it need to be "finding the right balance" - I mean, if I make $50k each year and I have no deduction/other income or spouse or kids or investments, then essentially I should be paying tax based on the year's bracket/rates.
So electing two allowances (per the W4 form) should have no surprises. Last year I worked for 2 months as an intern and I think i chose 1 allowance and i got some money at the end of the year. This year, I just started a FT job and nothing else is likely to change. So as per the form, shouldn't I be chosing 2.
I don't understand why they'd allow this flexibility and leave people guessing on their tax liability
They allow flexibility because there are so many variables. Wages, spouses, and kids are not the only factors affecting tax liability.
What if you are making tax-deductible contributions to an IRA? What if you have capital loss carryovers? What if you own stock in an S Corp and have income/loss from that? Or a share in a partnership? What if you own rental property? What if you have a stock portfolio generating dividend income? What if you run a small business on the side?
It's just too complex for one withholding table to work for everyone. Single-1 is a good starting point. Try that and see how it goes.
Petunia 100, my point is that if everyone has (those salaried) a basic wage and then they fall into a certain tax bracket that ensures they'll be paying lets say 22% of their annual income in tax if everything else is NULL. if you pay medicare, FICA whatever else - you'll make adjustments for that and then you get your net. How hard is it for the IRS to make that assesment and make it available to people ?
Next would be making adjustments based on individuals circumstances - spouse, dependents, extra contributions, etc.
Third, investments and all things tax deducitble can usually be handled end of the year when filing your tax return which would determine ur eligibility for refund or a bill.
So for someone like myself who basically has one job one source of income -consistent and nothing else to worry about, I should know exactly how many allowances I need to make to set my bill right. There won't be any surprises. Why must I not know what I'm supposed to take an allownace for right now as opposed to playing the guessing game of what if until the end of the year.
Anyway, I chose 1 allowance despite the W4 form saying I could use 2.
Anyway, I chose 1 allowance despite the W4 form saying I could use 2.
That is exactly what you are supposed to do.
When you pay your taxes next year, you will find out whether that one allowance results in the correct amount of withholding. You may very well get a refund. Then you can decide whether to give your employer another W4 and change the number of allowances.
The allowances do take into consideration all the things you mentioned.
thanks suzy_q2010, last year i worked for 2 months and i remember chosing 1 allowance and getting some refund back. My circumstances won't change except that now I'd be working fulltime although more days in this tax year than last year. I wish there was a clear source that could specify it black and white
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