Living on a Budget, Saving Money/Filing exempt on W4??
It was suggested to me that I file "exempt" on my W4 because I'm not bringing home a lot of money. So much tax is taken out! I'm single with no dependents now.
The problem is that I owe the IRS for the last two years because I filed for too many allowances during those years. (Filed for six allowances so I could have more money to work with)
Is it wise to file exempt in my situation?
Is there a way for me to bring home more of my earnings?
Michelle, I apologize for taking so long to answer. First, just make sure you keep paying the IRS for your past taxes.I would also contact a CPA and present the question to them. I am not a tax expert but I will try and give you some direction here. The idea when it comes to taxes is to come as close to zero when you file. In other words you do not want to get a large sum back because you are giving the government a interest free loan. Also you do not want to owe them alot of money. it just stinks to pay the IRS extra, when they take more than enough now. I am not sure about you tax situation such as are you able to itemize etc or your tax rate. I always claimed 0 throughout the year and got the maximum taken out. You may be fine claiming one or two, it just depends on your tax bracket. Lets say you get 2000.00 back, that would be to much, so I would divide that number by 12 and adjust my W-4 to fit that. If you owe 2000.00, do the same and increase your with holding by that much. So contact a CPA and determine your tax rate, and what you can to adjust it and not owe as much and get the most you can out of your check.