Early Tax Question: What do you claim on your W4

[Leejai]

Just want to see what's safe to claim on my W4 so that I won't also have to pay taxes. I went to a couple CPA's in my local area, but they all told me the same (claim 9, keep all the money, gain interest, then pay the IRS).

I agree with them, but frankly, I don't trust myself to not save/invest wisely the money especially with the amount of time I spend here and in Hot Deals.

Any ideas on what I should claim:

Single (Not Married)
Recent Homeowner (throughout 2004)

House is shared with my cousin, so I'm not sure if both of us could claim Man of Household or something.

What you claim and your situation may help, so anything is greatly appreciated.

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[Bryophyte]

Head of household implies that you are financially interdependent with the other person, like a spouse or your children or other dependents. It doesn't have anything to do with roommates, unless you have are married to him (not legal for a few reasons.) You do your taxes, he does his taxes. Your filings have absolutely nothing to do with each other, unless you both are on the mortgage. If you are, you have to work out how you're going to claim the interest deduction.

Go to the IRS website and do the W4 worksheet to find out what you should put on the forms. The IRS won't let you get away with not paying throughout the year and having a big payment at tax time every year.

Oh, and post in the stickied Tax thread, you're more likely to get some help.

 

[djheater]

I think I calim 14 or something. Last year I owed $90

 

[KK]

Married and 5, I got a government backed interest-free loan for 2500, payable up until the 15 of april.

 

[EagleKeeper]

Originally posted by: Bryophyte
Head of household implies that you are financially interdependent with the other person, like a spouse or your children or other dependents. It doesn't have anything to do with roommates, unless you have are married to him (not legal for a few reasons.) You do your taxes, he does his taxes. Your filings have absolutely nothing to do with each other, unless you both are on the mortgage. If you are, you have to work out how you're going to claim the interest deduction.

Go to the IRS website and do the W4 worksheet to find out what you should put on the forms. The IRS won't let you get away with not paying throught the year and having a big payment at tax time every year.

Oh, and post in the stickied Tax thread, you're more likely to get some help.

We will respond there.

 

[dullard]

Originally posted by: Leejai
I went to a couple CPA's in my local area, but they all told me the same (claim 9, keep all the money, gain interest, then pay the IRS).

The federal income tax is a pay as you go tax. It is NOT a keep all the money and pay in one yearly lump sum tax. That advice can land you with a huge penalty in some cases.

1040 Instuctions (1.2 MB download) page 55/56.
You owe a penalty if:
1) The amount that you still owe is at least $1000 and
2) If you didn't pay at least 90% of what you owe in total during the year (ie you made too many claims).

There are exceptions:
1) The penalty is waived if last year you had no tax liability and you were a US citizen/resident for the full year.
2) You paid during the year at least as much as you did for the entire last year AND you don't earn over a certain limit.

Notice how claiming 9 when you don't actually have 9 to claim will very likely put many people into a situation where they owe a penalty and they won't be able to qualify for the exceptions. You may be able to avoid the penalty now, but if your situation changes you may not be able to do it in the future. There is no reason to get into this bad habit. Especially since you have trouble saving.