Tag: W-4

Posts Tagged ‘W-4’

What Are Allowances on a W-4?

Posted by admin on October 18, 2016
Last modified: November 2, 2016

You must pay tax to the IRS but your W-4 form lets you decide when to pay it.

When beginning a new job, you may remember your employer handing over a W-4 form (along with the pile of other paperwork) to fill out. Your W-4 form determines how much tax is withheld from your income based on how many allowances you claim.
You can claim a certain number of allowances depending on your life situation. Allowances conclude how little or how much your employer will withhold from your paychecks throughout the year for taxes. In other words, the size of your tax refund or tax due to the IRS after filing your taxesYou can claim as little as zero allowances or as many as apply to you and your tax situation. The ideal situation is to break even; no tax owed and no tax refund.

How many allowances should you claim?

The details to your specific situation (such as your filing status, number of children, etc.) will determine how you complete your W-4.

If your parents claim you: 

If you’re being claimed as a dependent on someone else’s tax return, you’ll most likely want to claim zero allowances. This is because your parents are claiming you as an exemption, rather than you claiming yourself.

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How to Determine Your W-4 Allowances

Posted by admin on October 18, 2016
Last modified: November 2, 2016

Confused about how to fill out your W-4 form?

If you’re completing your W-4 form and have no idea how many allowances to claim, you’re not alone. That being said, it’s important to be aware of the number of allowances you’re claiming to avoid a large tax bill after filing.

The W-4 form determines how much tax is withheld from your paycheck each pay period. That means, if there is too much tax withheld throughout the year, you’ll end up receiving a tax refund when filing your taxes. The opposite is also true. If too little tax is withheld from your paycheck, you’ll end up having to pay taxes later on.

What determines the number of allowances to claim?

The number of allowances you claim on your W-4 is dependent on your life circumstances. It depends on the number of jobs you have, if you’re married or single and how many children and personal exemptions you have along with your stance in the federal tax table.

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Do Back Taxes Affect Your Credit Score?

Posted by Michelle O'Brien on April 5, 2016
Last modified: December 21, 2016

Credit and taxes are both pretty high up there on the adult responsibility ladder.

Putting them together kinda makes you want to hide under a rock. Don’t worry. You don’t need to know everything about credit (or taxes) in order to start taking steps in the right direction. You’ll learn what you need to along the way.

Let’s take a look at some of the initial questions you probably have about your tax debt and how it will affect your credit score.

Will a tax debt show up on my credit report?

Well, it could. The IRS will not automatically run off to the land of credit agencies and warn them about you if you have built up some tax debt over the years. However, if you owe over $10,000 in taxes and continue to do nothing about it, then a Notice of Federal Tax Lien is automatically filed against you. This lien has the potential to be pretty damaging to your credit score it will show up as a ‘seriously negative’ item on your credit report. If this has happened to you, don’t panic and keep reading. We’ll let you know how to remove this from your record and prevent this from happening to you in the future.

Can I remove a tax lien from my credit report?

You have a tax lien. This is a stressful situation, but you can only panic so much. Now you need to take baby steps toward fixing it. To do this, you’ll need to initiate repayment of your debt. Since this can stay put on your credit report up to seven years after the bill is paid, it is important to take action sooner rather than later. (more…)

How to Complete a W-4 if You’re Married

Posted by Michelle O'Brien on January 13, 2016
Last modified: November 2, 2016

Tie the knot in your life and also on your taxes.

The honeymoon is over and it’s back to reality. With such a huge change in your life, it’s important to pay attention to how it will affect your taxes. Once the wedding bells in your head subside, update your W-4 form with your employer.

Completing a W-4 form can be intimidating especially knowing that your paycheck depends on it. Don’t let your tax return take the fun out of your recent marriage. Let us help you fill out your W-4 so that you can still break even this tax season!

 

You just got married.

Congrats to all of you newlyweds out there! Once you’ve found a place in your cabinets for all of those trinkets on your Bed Bath & Beyond registry, make sure you speak with your employer. You may or may not know already but filing a joint tax return screams ‘tax benefits’!

You should update your W-4 form to reflect your married filing status ASAP. You’ll want to do this as soon as possible so that it reflects on your tax return when you file for the year.

As a married couple with two sources of income, your tax rate is bound to change. Be sure to sit down with your spouse and discuss the household income you’ll both be bringing in. If one of you makes significantly less income, your joint tax rate could be brought down. What if one spouse is earning significantly more? You could be entering into a higher tax bracket.

 

You’re married… and just had a baby!

Babies probably play the biggest role in tax benefits. Funny…considering they can hardly utter ‘W’ or ‘4’. When you have a baby, you can claim an additional allowance. As a married couple planning to file a joint return, it is recommended that the spouse earning the higher income claim the additional allowance(s). The other spouse will not need to update their W-4 form. You may also qualify for the Child Tax Credit or Child Care Tax Credit depending on your income.  

Claiming a higher amount of allowances on your W-4 form will allow for less to be withheld from your paychecks. If you leave your withholdings as-is, your tax refund may be larger than necessary. Plus, you’ll probably need a little extra for Pampers and ear plugs (kidding!) throughout the year.

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How to File your First Tax Return

Posted by Michelle O'Brien on November 13, 2015
Last modified: November 2, 2016

Filing your first tax return is a bit like doing your laundry.

You don’t want to do it. You’d prefer someone just did it for you. But if you don’t do it, you know there will be consequences. 

Unlike laundry, you’ll need to do a bit more sorting, as in sorting through of all those tax forms. And unlike laundry, you really should know the basics before you start. Don’t worry though: you’ll get through it and probably even get a refund afterwards.

 

Find out if you are being claimed as a dependent!

The first thing you should do is talk to your parents. Since they’ve been claiming you as a dependent since before you could even utter the words, ‘tax return’, make sure they know you are planning on filing for yourself to avoid being rejected by the IRS. Each and every person is allowed to claim a personal exemption for themselves or their dependent. However, only one exemption can be claimed per person.

Here’s a classic scenario:

Abby was just hired as a barista at that awesome new cafe downtown. She makes a decent income and her co-worker mentions that she could probably cash in on a nice refund come tax time. Being that Abby is only 17 and earning less than the threshold allotted by the IRS, her parents can still claim her as a dependent on their return. If Abby files a tax return and claims the personal exemption for herself, not noting that she is being claimed as a dependent, and then her parents claim the personal exemption for Abby on their return, the IRS will reject the last tax return submitted.

 

Do you know the age requirements to be claimed as a dependent?

Although your age doesn’t specifically determine if you need to file a tax return, it is a key player in whether or not you can be claimed as a dependent on someone else’s taxes. When it comes to age, you can only be claimed as a qualifying child dependent if one of the following is true: (more…)