Just started my first job....have some tax questions.

[chuckywang]

I am single with only one job. I am renting part of a house right now. However, I pay my own expenses (rent, food, gas). Not all expenses, because I go home over the weekend, but definitely more than 50%. Therefore, can I also file as "head of household" for a total of 3 exemptions? More exemptions means less taxes, so I want to make sure I don't miss anything.

What does exemption from withholding mean? Can you only claim that if you don't expect to pay any taxes for the year?

 

[Mermaidman]

Exemptions affect withholding. It only affects how much tax you pay up front, but not your tax liability. The ideal situation is to withhold enough so that you end up owing the IRS a little bit (maybe a few hundred dollars) when you file your income tax for the year.

Withhold too much and you give the federal govt a free loan. Withhold too little too often will have the IRS coming after you for penalties. Your 3 exemptions sounds right for a single guy.

 

[doze]

More exemptions does not mean less taxes, it means less taxes taken from your paycheck in advance. You still have to pay the IRS money at the end of the year so unless you have a savings account then I suggest putting 1. I am single with 1 job and have put 1 for years and always got several hundred back at the end of the year.

 

[chuckywang]

Originally posted by: doze
More exemptions does not mean less taxes, it means less taxes taken from your paycheck in advance. You still have to pay the IRS money at the end of the year so unless you have a savings account then I suggest putting 1. I am single with 1 job and have put 1 for years and always got several hundred back at the end of the year.

Like Mermaidman said, that's essentially a free loan to the government.

Grr...why does withholding even exist? You'll still end up paying the same amount of taxes no matter how much you withhold. Why can't the IRS just let you keep all your income to invest or whatever, and then you pay the IRS the tax you are reponsible for once a year. Is it because there are too many deadbeats that if you don't take the tax from their paychecks, they'll never pay it?

 

[Sukhoi]

Originally posted by: chuckywang

Originally posted by: doze
More exemptions does not mean less taxes, it means less taxes taken from your paycheck in advance. You still have to pay the IRS money at the end of the year so unless you have a savings account then I suggest putting 1. I am single with 1 job and have put 1 for years and always got several hundred back at the end of the year.

Like Mermaidman said, that's essentially a free loan to the government.

Grr...why does withholding even exist? You'll still end up paying the same amount of taxes no matter how much you withhold. Why can't the IRS just let you keep all your income to invest or whatever, and then you pay the IRS the tax you are reponsible for once a year. Is it because there are too many deadbeats that if you don't take the tax from their paychecks, they'll never pay it?

Yes. You expect people in this country to have financial responsibility when paying 20% on a credit card loan is deemed normal?

 

[allisolm]

If you are single and are not being claimed by your parents you don't file as head of household. You file as single (assuming you have no children). The only exemption you would have is yourself.

 

[kranky]

Originally posted by: chuckywang
Grr...why does withholding even exist? You'll still end up paying the same amount of taxes no matter how much you withhold. Why can't the IRS just let you keep all your income to invest or whatever, and then you pay the IRS the tax you are reponsible for once a year. Is it because there are too many deadbeats that if you don't take the tax from their paychecks, they'll never pay it?

It's that there would be a revolution if people had to write a check for their entire income tax liability all at once. Then they'd realize how much they actually pay.

I have co-workers who believe the person with the biggest refund is the most knowledgeable about taxes! How clueless is that? They have completely lost touch with the fact that the refund is only the excess they paid. The actual amount they paid doesn't even register with them.