W-4 Tax Form question

[Arximiro]

I'm starting a new job tomorrow and want to know what I can put on the w-4 to get the most back each check, but not have too much if anything to pay when tax time comes around.

I'm sure we got someone in here that is good at this stuff, any help is appreciated.

Edit: I keep seeing people saying to claim 1-2 if you are single then I see people say to claim 9 (this is legal). For the record I'm single with no children.

[Dolmen]

It depends on what you anticipate your yearly income to be. At my firm we generally recommend Single 1 or 2, depending on gross income.

Edit - Actually, you can use this website which is pretty close on figuring taxes out:
http://www.yourmoneypage.com/withhold/in.php

Plug in 2010, Single, number of pay periods per year, and then gross amount per paycheck. You can find your 2010 tax liability on the following schedule:
http://www.irs.gov/pub/irs-pdf/f1040es.pdf

After you know that you can play around with allowances to get your annual taxes right. Ideally you want to owe the government as much as you can without getting penalized for underpayment.

Edit again - Some people claim numbers like 9 if they know that their AGI is going to be driven down via loses, lower pay, married with house payments, etc...

[Arximiro]

Well since this is the first job I've had all year, I know I'm not going to make 15k, and I seen on one website that if you make under 15k you can claim 9 and be good to go because it's under some IRS minimum, is this true?

[FNH]

You likely won't have enough taken out of your check putting 1 to even worry about the legalities of putting 9.

[Dolmen]

If you will make $17,725 or under per year, you will have no tax liability:
$17,725/year - $5,700 standard deduction - $3,650 personal exemption = $8,375 Adjusted Gross Income (AGI)
$0-$8,375/year AGI means no tax liability for the year.

In this case, tell your employer that you want 0 federal tax taken out. I don't really know Indiana tax code (specifically the locality tax codes), so I can't say what your tax liability there would be.

[Arximiro]

So what exactly do I do on the W-4 to have no federal taken out, and do I need to change it at the start of next year? (Since I hope to make more than 17k next year). I hate to tell them I don't want taxes taken out and him give me a hardy wtf chuckle.

[Dolmen]

On Line 7 of the W-4 write "EXEMPT." I do payroll for some of my clients, and it's not uncommon at all to have an employee with $0 withholding on Federal/State.

[Arximiro]

Thanks a bunch Dolmen, if there was a thank you feature on here I would indeed push it for you. I just wrote exempt, but I put to claim 4 allowances as well, does that matter? I assume at the beginning of 2011 I need to go back in and take off the exempt, but is it going to mess anything up for this year having the 4 allowances on there?

[drayno]

It wont mess anything up, Just remember to actually change it. Exempt is fine to put down. As for the 4 dependants, don't bother with that as it could cause a mix up with payroll.

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[Dolmen]

In most payroll systems there is an option to select no federal tax to be taken out, so the allowances won't even affect anything. In early December the 2011 W-4 should be released on www.irs.gov, so look for it. When they post it make sure to print the form out and "update" your W-4 status. Turn that new form in to your employer for 2011, and they'll take care of it. What you claim will naturally be based on what your expect your yearly income to be, but generally claiming Single 1 or 2 is fine for tax liability.

Many people claim Single 0 to get a large tax refund. Even though they're giving the government an interest free loan, it's that "out of sight, out of mind" philosophy, so their tax refund becomes the vacation fund.

[Headspace]

Many people claim Single 0 to get a large tax refund. Even though they're giving the government an interest free loan, it's that "out of sight, out of mind" philosophy, so their tax refund becomes the vacation fund.

Guilty.

[Dolmen]

Guilty.

I do it too. :D I end up using it to pay off my tuition & book costs and anything left over from Xmas spending. With interest rates these days, the amount of cash you'd make in interest negligible.