Tax Help

[Circlenaut]

Well I'm starting a Job soon and they gave me the option of claiming 1 (myself) or zero. From what I understand, in the end I'd end up paying the same amount of taxes. If I claim myself then my taxes would be deducted from my paycheck directly and sent to the gov't. Come april if I payed too much then they'd send me a refund. Now if I claim zero, then I'd just get a huge bill for my year's tax. Well, I live with my parents and thus my expenses are very low so I save pretty much all that I make with my Emigrant Direct account. Now my real question is, since the money I save earns interest (5.15%) and the money that gets deducted from my check doesn't, would I end up paying less taxes in the end if I claim 0? Since the money I pay the taxes with earned interest, the orginal amount would be slightly less. Since we're talking thousands of dollars here, 5.15% could save me hundreds. Does this make sense? BTW my parents don't claim me.

 

[JS80]

claim 2

 

[Circlenaut]

Originally posted by: JS80
claim 2

Why?

 

[vi edit]

You've got it wrong. Claiming "0" takes out the most taxes. It means your paychecks will be smaller and you'll likely receive a refund at the end of the year.

If you claim 1 they take out less and you have larger paychecks throughout the year. This is the route you would go if you want to bank things on your own interest rate and possibly pay in at the end of the year.

 

[JS80]

Originally posted by: Pippy

Originally posted by: JS80
claim 2

Why?

so you don't give an interest free loan to the gov't.

 

[chowderhead]

use the IRS tax calculator to calculate your witholdings Since your case is pretty straigtforward, you should work towards witholding enough taxes such that you won't owe too much or get too much refund back.