# Witholding question.....



## MarriedMan09 (Jul 2, 2010)

My wife and I just had our first child. 

Even before our child was born we discussed the issue of wether or not she can stay ay home with the baby. She really want to stay at home and I want her to be happy but the finances are just not working out but becasue she really wants to stay at home I just keep running the numbers different ways in hopes that I can find a way.

To be honest, I dont know how we cant, we live below our means, have a small house with a small Mortgage payment and have no credit card debt, though everytime I run the numbers we end up in the hole.

I am currently looking into witholdings from my paycheck. I have always filed single with 0 exemptions because I am afraid of owing at the end of the year. The las coupl of years I have been getting refunds of 4k+ so I know I am witholding way to much but still I am concerned that if I change it I will end up owing big time.

When I reun the calculator at IRS.gov it tells me I have 15 exeptions... that cannot be right... no way... I guess they are looking for people to audit.


What do you guys do for witholding? Anyone in my position?


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## MGirl (Mar 13, 2011)

Hm, 15 is ridiculously high. My husband had been claiming 0 for a long time(family of 3 as well) and we got decent tax returns each year. This past year we changed his exemptions to 4 and it's turned out perfectly. We still get a small tax return and we get to take home a lot more each month. I don't know...15 just sounds crazy. Are you using this link? IRS Withholding Calculator


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## MarriedMan09 (Jul 2, 2010)

Yeah that is the one I used. 

This is what it said....

For the only job you entered (which has a projected salary of .......): 15 allowances.
Check the “Single” box on your Form W-4.

I agree its stupid high.


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## MGirl (Mar 13, 2011)

MarriedMan09 said:


> Yeah that is the one I used.
> 
> This is what it said....
> 
> ...


Why not check "married" ? I don't understand.

ETA: I just ran through the calculator and was told to choose 7 exemptions if filing married jointly, 4 if filing single. Since it's already April, you've probably had a LOT withheld already, so it's trying to balance your withholdings out.


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## MarriedMan09 (Jul 2, 2010)

Well, if she is not working I figured I would be "head of Household" so that is what I checked. I guess it lables that as single at the end.


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## MGirl (Mar 13, 2011)

We've never filed head of household...I use TurboTax and it always told us that we'd get more back filing jointly. Not sure if it actually makes a difference or not?


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## MGirl (Mar 13, 2011)

It appears you can only file head of household if you are: unmarried, can claim someone as a dependent, and paid more than half the cost of keeping up a home for the year.

Got some info here: Head of Household Filing Status - Claiming the Head of Household Filing Status on Your Tax Return

and here:

Publication 501 (2010), Exemptions, Standard Deduction, and Filing Information

Doesn't sound like you qualify at all 
By filing head of household, you're essentially filing as a single parent.


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## Catherine602 (Oct 14, 2010)

Just to let you know, 10 or more exemptions kicks out the return for extra scrutiny. They may request that you to mail copies of recites for items that you claim, like work exemptions, travel etc. They look for likely ways to get more revenue and most people can not provide recites. They deny the claim, charge interest and penalties and may tack on a fine for filling a fraudulent return. They generally wait for several months to spring this on you. More interest and penalties. They manage to get the revenue that that they calculate you should have paid for your income bracket and then some.
_Posted via Mobile Device_


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## lime (Jul 3, 2010)

MarriedMan09 said:


> My wife and I just had our first child.
> 
> Even before our child was born we discussed the issue of wether or not she can stay ay home with the baby. She really want to stay at home and I want her to be happy but the finances are just not working out but becasue she really wants to stay at home I just keep running the numbers different ways in hopes that I can find a way.
> 
> ...


This is not really an answer to your question, so I'm sorry if it's totally useless. But I just wanted to caution you--if you're going to be sacrificing contributions to retirement accounts, then it's probably not the best option for her to stay at home. 

Everyone wants the best for their kids, and unfortunately sometimes that means making short-term sacrifices for long-term gains. If you're sacrificing money now, you won't have enough to pay for college, enroll your kids in after school activities, get them tutoring services if they need it, etc. in the future. 

_Instead of thinking only about what your wife wants, think about what your kids want--and what they'll say when they look back on their childhood._ Maybe it will be worth it for them to have a stay-at-home mom, but maybe it won't. As a current college student, I can confidently say that I have friends on both sides of the spectrum...Most of them have unreal amounts of debt, and a few are incredibly disappointed in their parents for abandoning them to 6 figures worth of student loans. Another friend's parents were killed in a tragic accident, and he is incredibly grateful that he got to spend all that time with them when he was little (his mom stayed home and his dad worked from home some days). You can never really predict, but it's important to consider both outcomes. 

I'm not trying to place judgment, just offer another perspective that many other people are unfamiliar with. For me and my current age group, these kinds of choices are very real and many of us are living the consequences of our parents' choices.


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## 827Aug (Apr 27, 2008)

The use of exemptions of 10+ comes into place when a payroll department needs a flat tax rate. It is commonly used when an employee has a garnishment for alimony (tax deductible for the employee). Otherwise the employee would have way too much federal withholding pulled out--and would have to wait until the end of the tax year for a big refund.

Assuming your wife is NOT working. Your correct status and exemptions on your W-4 form should be "married" with "3 dependents".


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## Halien (Feb 20, 2011)

MarriedMan09 said:


> My wife and I just had our first child.
> 
> Even before our child was born we discussed the issue of wether or not she can stay ay home with the baby. She really want to stay at home and I want her to be happy but the finances are just not working out but becasue she really wants to stay at home I just keep running the numbers different ways in hopes that I can find a way.
> 
> ...


If you are disciplined with your money, it goes against your own financial health to give extra to the government to let them hold it, only to give it back to you months later with no interest. I'd recommend changing it to the level in the last post, but just keep a small amount in reserve until you know for sure that you will not have to pay.

Beyond that, as a guy who was once in your position, it is important that you have a reserve fund to cover up to several months salary, if possible. Emergencies will occur. My wife was pretty savvy at following cost cutting ideas like cooking a couple of weeks worth of meals in one batch, freezing them, and other ideas from books she found in the library. Ultmately, I had work around the holidays on Friday and Saturday nights in moving boxes in a delivery hub. Our goal was to provide the children with an enriching childhood, so we planned ahead for things like Disney, museums, etc.


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## Affaircare (Jan 11, 2010)

827Aug said:


> The use of exemptions of 10+ comes into place when a payroll department needs a flat tax rate. It is commonly used when an employee has a garnishment for alimony (tax deductible for the employee). Otherwise the employee would have way too much federal withholding pulled out--and would have to wait until the end of the tax year for a big refund.
> 
> Assuming your wife is NOT working. *Your correct status and exemptions on your W-4 form should be "married" with "3 dependents"*.


:iagree: :iagree: :iagree: :iagree: 
If you want to be conservative, you can choose Married with 2 dependents and they will withhold a little more and you'll have a slightly bigger refund at tax time. 

But beyond your withholding rate, when I had children (and together Dear Hubby and I have seven) I also was determined to have one of us be a SAHparent--it seemed "right" to me that if we have children that we be the ones to care for them and raise them. However like you our finances required that I work. Well have you ever LOOKED at the cost of daycare? Especially daycare for an infant. It is astronomical! If your wife earned 2500-3000 a month she'd likely bring home maybe a few hundred AND have all that time lost with your child. 

Thus I recommend doing what I have always done. I work from home. While I was raising my children I also babysat for other children--usually just under the state limit to be a "daycare", so for example I had two regulars that I sat for. I specialized in late-night or over-night care and charged a reasonable rate so that I made money but the other working mom's weren't losing money too. I sat for a nurse who did the 3-11pm shift and a bar manager who worked until 3am then had to close up. She would go home after work, sleep for a few hours, and come pick him up about 8-9am and have coffee with me. But late-night or over-night childcare (again) is ludicrously expensive, so I saved them some money, earned some of my own, and basically cared for a sleeping child so their mom could earn a living.


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## MarriedWifeInLove (May 28, 2010)

I'm an IRS trained tax representative.

You cannot file as head of household.

Your status is considered "married filing joint" or "married filing separately" with one dependent.

If you want a bigger tax refund (considering you are entitled to one normally at your currently yearly income range), then have them withhold married, but at the single rate - this will take out the largest $$ in taxes.

If you want to use your money more in the year and not give your money to the IRS to use as an interest-free loan for the year, then file married with two or married with one. With two will withhold less, with one will withhold more.

But 15 - no way - something wrong with the calculation or the answers to the question(s).


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## 827Aug (Apr 27, 2008)

MarriedWifeInLove said:


> Your status is considered "married filing joint" or "married filing separately" with one dependent.


As a person with an accounting degree and has worked with payroll for 16 years I really don't understand this.....unless the tax rules changed in 2011. HIS WIFE IS NOT WORKING. Therefore, he is entitled to claim 3 exemptions--himself, his spouse, and his child. And he should file as married filing jointly. Remember he is trying to come as close as possible to the exact amount.


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## sisters359 (Apr 9, 2009)

827Aug said:


> As a person with an accounting degree and has worked with payroll for 16 years I really don't understand this.....unless the tax rules changed in 2011. HIS WIFE IS NOT WORKING. Therefore, he is entitled to claim 3 exemptions--himself, his spouse, and his child. And he should file as married filing jointly. Remember he is trying to come as close as possible to the exact amount.


Yes, but I think in a post previous to the one above, you wrote he could claim 3 dependents--when you meant 3 exemptions.

Right now he's claiming 0 (not sure if it was dependents or exemptions). By adding 1 or 2 exemptions, he can reduce his withholding rate and still have some lee-way so he doesn't have to pay money next April.

Oh, and I also agree that staying at home with a child until s/he is in less expensive day care (infant is outrageous!), is often the best choice. You need to add not only the costs of working (transportation, clothes, etc.) but also the stress and risks associated with missing work b/c of a sick child--which may happen more if the child is in daycare. Lots of variables. Bottom line: both working with an infant in the home may prove to be less thrifty than one parent staying home.


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## 827Aug (Apr 27, 2008)

I'm sorry....for W-4 form computations I use the terms exemptions/dependents interchangeable. I also do not know the poster's income level. He may be entitled to other things. He really needs to get a complete W-4 with work sheet....and do the work sheet.

The W-4 form calls the items "allowances" while the tax forms calls the items "dependents" or "exemptions". Even the IRS can't decide what we should call a warm body.


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