Claiming the correct number of excemptions for federal tax?

You may have to pay a penalty if you owe more than $1000 in taxes. The IRS automatically computes the 2210 penalty form for you and sends you the bill. That same form describes several ways owing more than a thousand DOESNT always trigger a penalty.

There's even a worksheet on the W-4, which you can get from your employer. Make sure you work through the entire thing. At a bare minimum you should be claiming four withholding allowances, assuming you don't have a lot of income not subject to withholding.

-- Phil Marti Clarksburg, MD

Read and follow the instructions that come with your W-4 form.

wrote

What are you claiming now? Should be like married and four, but could be higher to account for deductions and credits. See if you can talk to someone at your employer in HR (payroll) that can tell you how much more take-home you would have as you increase your allowances. Remember, federal and state allowances can be different, and especially today with the child tax credit at the federal level.

-- Paul A. Thomas, CPA Athens, Georgia

Try estimating your full year's tax and subtract $1,000. If less than that, use last year's tax (110% of last year's tax if your AGI was over $150K last year). Subtract withholding to date, divide the remainder by the number of paychecks yet to come. Have personalle add enough to your present withholding amount to meet that amount. You'll owe at least $1,000 next April but won't have a underpayment penalty. Next year divide this year's tax (or 110% of it). Divide that by number of paychecks. Tell peresonalle to deduct that amount. ed

No "rule of thumb", but there are rules which you'll find on the form W4 itself. get a copy of it and see what's the maximum allowable. From what you say above, and with no other facts, you qualify for at least 5 allowances (NOT exemptions.) If the two kids qualify for the child tax credit, make that at least 7 allowances. ChEAr$, Harlan Lunsford, EA n LA

If you are counting on an annual income tax refund to pay down your credit card debt, you will most likely fall behind each year. While it may be a good idea to minimize your refund by adjusting your withholding, will the extra money in each paycheck be used to pay your credit card bill in full?

-Mark Bole

There is no rule of thumb per se. There are various methods to compute how much should be withheld from each paycheck. A good starting point is to read the instructions on form W4 & inquire of your CPA/tax advisor what is most appropriate to your case. The perspective of withholding is to cover your tax liability, not to overpay it. You should withhold enough to avoid penalties and pay the balance next April. Getting large refunds each year is poor tax planning (to put it politely). A large refund is giving the government and interest free loan. Better to owe on April 15th - but not pay a penalty. You should also apply the above to your state income tax situation. If you're not subject to AMT, you may want to consider pre-paying the state liability on Dec 31st, to get the deduction a year earlier. ___________________________________

-----> real address on hobokeni or hobokenx

I said in prior post: "Next year divide this year's tax (or

110% of it). Divide that by number of paychecks. Tell peresonalle to deduct that amount." It should have read: "Next year (2008) divide 2007 tax (or 110% of it) by the number of paychecks in 2008 and have Personelle withhold that amount from each paycheck". ed