W-4 interpretation

Jan 15, 2007 1 Replies

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I used an ADP calculator to adjust our 2007 W-4 so we do not get a refund in 2008...

1) ADP suggests zero is put on line 5- is this zero taxes taken out, or zero exemptions claimed?

2) ADP is suggesting to put $106 on line 6 of W-4 is this the total taxes taken out, or $106 MORE than what is taken out with 0 exemptions?

3) ADP has this note as well- please help interpret- "If you have a working spouse. figure the total number of allowances you are entitled to only one form W-4. Your witholding will usually be most accurate when all allowances are claimed on the highest paying job and zzero allowances are claimed on all others."

Does this mean zero allowances is zero taxes taken from spouses paycheck?

if someone needs specific incomes to give correct answers, please let me know.

4) Is their a difference between an "allowance" and an "exemption"? Please explain. Thx.

That means zero allowances. This means they will withhold the maximum amount of taxes. Unless...

It means $106 MORE (per paycheck) than with 0 allowances. I believe this is the intent of this line: to allow more taxes to be withheld than with 0 exemptions. You can also use this line to fine-tune your withholding if, for example, you're between allowances.

I'm not so sure about this. And the IRS's own withholding calculator certainly disagrees. My wife and I both had allowances last year and I believe we got the withholding right to withing $50.

Yes. Your allowances only determine how much money is withheld from your paycheck. Your exepmtions are the things that are used to actually compute your taxes. Generally speaking, one exemption equals one allowance, but that doesn't get in to the realm of credits and deductions. And that gets a whole lot more complicated. How much does one exemption equal in itemized deductions? Well, it all depends...

I HIGHLY recommend the IRS's withholding calculator. You can find it at:

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I used this last year and got our withholding right on the nose. In order to do so, I had to claim 8 allowances and my wife 6, despite the fact that we have no children. But once we factored in charitable donations, state income tax, mortgage interest and the credit for my Prius, those turned out to be the correct numbers. At least... I hope they're the correct numbers. I'll let you know in a month or so. :-p

--Bill

W-4 interpretation

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