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Financial Planning / Tax Strategies


Subject:  Re: W-4 Date:  9/29/1999  5:41 PM
Author:  edcosoft Number:  19246 of 129670

I tried searching through the site to find the answer and
couldn't find one. My husband and I are a little confused on
how we should each claim ourselves as on our W-4's. We
got married in January, had a son in June, and I make more
than him. I'm basically a tax idiot and with the 0-1-2-etc. to
file as, I'm confused! Help us!

If you each took one exemption last year, single, and it was correct, or you got a refund, and one of you add one for the child for ALL of this year (and next year) the marriage penalty would have you overpaying. Since your adding the exemption late this year, you'll be overpaying even more in 1999.

You are allowed to comple a W-4 so as to pay the correct amount of withholding, regtardless of whether the number of exemptions makes sense or not. Therefor, if you want to NOT overpay, try to estimate this year's tax and adjust your withholding for the rest of the year so that the total for the year for both of you is just over 90% of the estimate. Change one ( or both) W-4 to achieve this with as many exemptions as are necessary. Next year, adjust your withholding again so the total withheld by both of you in 2000 is just in excess of 1999's actual tax. Keep doing this as long as your income increases, or stays the same, each year. If you have another child, make the estimate adjustment again in that year.
If you understand this, and want to know why, I'll be glad to explain, but basically you're meeting withholding tax "safe harbors" so if you underpay you won't owe any penalty, and you won't be falsifying a W-4. Ed
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