6 ms·

Can't you just set it to zero and forget about it?

by newsoul2019 8y ago

Amorymeltzer 8y ago
Not sure what "it" is in this scenario, but if you owe too much in April, there's a penalty and you may need to pre-pay the following years' taxes; and if you are refunded too much, you have granted the government a large, zero-interest loan. I also believe that, however unlikely, lying on your W-4 is technically punishable by fines/jail/whatever.
JonathonW 8y ago
If you have a single source of income and don't mind over-withholding (and getting a refund come tax time), yes. If you want to reduce the amount you're withholding (so you pay less during the year, and receive less of a refund), you have to claim allowances. And the way those connect to the amount actually withheld isn't entirely straightforward (it's the tables starting on Page 48 at [1]). And then it gets way more complicated if you have multiple sources of income, because the withholding calculations don't work in that case (underestimates your withholding, and you end up owing the IRS money at the end of the year). I haven't seen the new form and can't say whether or not it's actually any better, but it can't be much worse; the current W-4 is one of those forms that looks simple ("just" two numbers to punch in) but turns out to be a fair bit more complicated. [1] https://www.irs.gov/pub/irs-pdf/p15.pdf https://www.irs.gov/pub/irs-pdf/p15.pdf
cmurf 8y ago
Unlikely. You sign the W-4 statement: Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete. Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government. You can claim a withholding exemption only if last year's tax liability was zero, and if you expect this year's tax liability will be zero.
- pwinnski 8y ago
  You might want fewer allowances if you have another source of income for which nothing has been withheld. The only way for me to avoid making payments is to specifically ask for an additional amount to be withheld in addition to claiming an allowance of 0.
- jedberg 8y ago
  > And why would you want fewer allowances? Because you have investment income that is otherwise untaxed. I know someone who put 0 and still owed money at the end of the year, but didn't have to make quarterly payments. She had enough investment income to owe, but not enough to hit penalty levels of owing.
- rbritton 8y ago
  One reason I've used 0 in the past is to allow for multiple income sources (e.g., an employee at one company and a self-employed side project). The worksheet allows for negative offsets to be added into the final deduction count recorded. It avoids the need to deal with quarterlies if the withholding amounts are close enough.
- toast0 8y ago
  > Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government. If you have other income that's not easy to setup withholding on (such as stock related income, a home sale, or rental income), it can be useful to have more withholding from employment income. A benefit is that you are allowed to pretend withholding is evenly distributed over the year, even if it's not, or if it's more beneficial, you can use the actual timeline for withholding, although that takes a lot more effort.
- javagram 8y ago
  I don’t think that oath prevents you from putting zero allowances. Nothing on the form states that the number of allowances you claim needs to match the worksheet’s results. The IRS online calculator will explicitly give you different allowances to claim than the worksheet does. The penalty of perjury would apply if you used a fake SSN or address.
basch 8y ago
is Zero an option anymore, or is this entire article about how they are making the form more accurate instead of just picking a nearby number out of a hat?

Can't you just set it to zero and forget about it?

Not sure what "it" is in this scenario, but if you owe too much in April, there's a penalty and you may need to pre-pay the following years' taxes; and if you are refunded too much, you have granted the government a large, zero-interest loan. I also believe that, however unlikely, lying on your W-4 is technically punishable by fines/jail/whatever.

JonathonW 8y ago

If you have a single source of income and don't mind over-withholding (and getting a refund come tax time), yes. If you want to reduce the amount you're withholding (so you pay less during the year, and receive less of a refund), you have to claim allowances. And the way those connect to the amount actually withheld isn't entirely straightforward (it's the tables starting on Page 48 at [1]). And then it gets way more complicated if you have multiple sources of income, because the withholding calculations don't work in that case (underestimates your withholding, and you end up owing the IRS money at the end of the year). I haven't seen the new form and can't say whether or not it's actually any better, but it can't be much worse; the current W-4 is one of those forms that looks simple ("just" two numbers to punch in) but turns out to be a fair bit more complicated. [1] https://www.irs.gov/pub/irs-pdf/p15.pdf https://www.irs.gov/pub/irs-pdf/p15.pdf

cmurf 8y ago

Unlikely. You sign the W-4 statement: Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete. Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government. You can claim a withholding exemption only if last year's tax liability was zero, and if you expect this year's tax liability will be zero.

pwinnski 8y ago
You might want fewer allowances if you have another source of income for which nothing has been withheld. The only way for me to avoid making payments is to specifically ask for an additional amount to be withheld in addition to claiming an allowance of 0.
jedberg 8y ago
> And why would you want fewer allowances? Because you have investment income that is otherwise untaxed. I know someone who put 0 and still owed money at the end of the year, but didn't have to make quarterly payments. She had enough investment income to owe, but not enough to hit penalty levels of owing.
rbritton 8y ago
One reason I've used 0 in the past is to allow for multiple income sources (e.g., an employee at one company and a self-employed side project). The worksheet allows for negative offsets to be added into the final deduction count recorded. It avoids the need to deal with quarterlies if the withholding amounts are close enough.
toast0 8y ago
> Where you must have at least an allowance of 1, for yourself. And why would you want fewer allowances? That results in more withholding, which is an interest free loan to the government. If you have other income that's not easy to setup withholding on (such as stock related income, a home sale, or rental income), it can be useful to have more withholding from employment income. A benefit is that you are allowed to pretend withholding is evenly distributed over the year, even if it's not, or if it's more beneficial, you can use the actual timeline for withholding, although that takes a lot more effort.
javagram 8y ago
I don’t think that oath prevents you from putting zero allowances. Nothing on the form states that the number of allowances you claim needs to match the worksheet’s results. The IRS online calculator will explicitly give you different allowances to claim than the worksheet does. The penalty of perjury would apply if you used a fake SSN or address.

basch 8y ago

is Zero an option anymore, or is this entire article about how they are making the form more accurate instead of just picking a nearby number out of a hat?