W4 filing jointly with step-children

[kogi58]

Hi all,

we are a little bit stuck on how to set up our W4s for future. Situation is: my husband gained 100% physical/joint legal custody of his two minor kids (they live 100% with us so he can claim them). We both work and will file jointly, my income will be significantly higher than his. I read that the kids should be claimed through the higher paying job, but I don't have custody, I'm the step-parent. This new W4 is so confusing and not easier at all! It was much easier through the old allowances but we also don't want to owe taxes. We didn't take the advance tax child credit either so far, we want to claim it with 2020 tax return.

How are we all setting this up best? We don't have any assets really except each our cars.

Thanks for your advise!

[rjs]

On your tax return, and on the W-4, stepchildren are treated the same as if they were your own children.

You can use the Tax Withholding Estimator on the IRS web site to figure out what you should each put on your W-4 forms. It will show you how to adjust your withholding to get the approximate refund amount that you want.

[kogi58]

The estimator doesn't tell you at all actually on how  you have to adjust anything. It just estimates your return - I've done it and it's no help at all on how to fill the new W4 out. The question still is whether I have to claim him or me - simply because of his custody situation.

[rjs]

On the last screen of the Tax Withholding Estimator, where it shows your refund, click "How to Adjust Your Withholding" to see what to put on your W-4. There is also a slider you can use to adjust the amount of the refund.

The Tax Withholding Estimator doesn't estimate your return. It estimates your refund. Your tax return is the form you send to the government that shows your income and calculates your tax. The money the government sends back to you is your refund.

"His custody situation" has nothing to do with it. Either of you can use either or both of the children on your W-4. It's the same as if they were your own children. The fact that they are stepchildren doesn't matter. On your joint tax return you are both claiming the children together. It makes no difference whose children they are.

[Opus 17]

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@kogi58 wrote:

The estimator doesn't tell you at all actually on how  you have to adjust anything. It just estimates your return - I've done it and it's no help at all on how to fill the new W4 out. The question still is whether I have to claim him or me - simply because of his custody situation.

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A step-parent has the same legal right to claim a child as a dependent as a biological parent, and the ability to claim the children just depends on the same usual factors that apply to the biological parent (where the children lived, how old they are, and if they supported themselves or not.)

Then, as long as you will be filing a joint married return, you and your spouse are essentially "one taxpayer" for most purposes.  If the children lived in your home more than half the year, you can claim them as dependents on your joint return.

Because you will file a joint return, you need to coordinate your W-4s and whenever you submit one to a new job, you need to review them all and sometimes submit new forms to all your jobs.  If you don't like the online calculator, use the worksheets on the W-4 itself; the whole form is 4 pages including instructions and worksheets, even though the employer only needs page 1 with the signature.

Where the instructions say that the withholding will usually be more accurate if the dependent adjustments are made on the job with the higher income, it's perfectly fine if that is you, because you are a legal parent under the tax law and will presumably be filing a joint return. 

[VolvoGirl]

And what you put down or claim on the W4 does not have to match your actual tax return.   It is just to tell your employer how much withholding to take out.   I'm married but claimed Single and zero when I was working to have more taken out.

[kogi58]

Thank you for all your replies! Super helpful! What is confusing for us basically is the new W4 as I cannot put an allowance number such as 0, 1 or 2 anymore. You put directly amounts in if you claim a child. The form basically says: if you file jointly and have about the same income to check a certain box. It won't apply to us.

Now my HR tells me we both have to claim the children on our W4 as we have a joint income. But I don't want to be in a situation where we have to pay taxes back. Does anyone know about this?

[AmeliesUncle]

Only ONE of you should be claiming the children on your W-4.

Be sure that you both check the box on line 2(c) of your W-4.

[rjs]

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@kogi58 wrote:

The form basically says: if you file jointly and have about the same income to check a certain box. It won't apply to us.

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That's Step 2 option (c). If it doesn't apply to you, then don't check the box.

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@kogi58 wrote:

Now my HR tells me we both have to claim the children on our W4 as we have a joint income. . . . Does anyone know about this?

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That's nonsense. The form and the instructions clearly say to claim the children on only one W-4. The HR people may be experts in human resources. They are obviously not tax experts. Do not rely on them for tax advice.

The IRS Tax Withholding Estimator will eliminate all the confusion. It will tell you what you should each put on your W-4s. As I said before, it will let you adjust your withholding to get the approximate refund amount that you want.

Note that Step 2 on the W-4 form says the following.

"Do only one of the following.
(a) Use the estimator . . .
(b) Use the Multiple Jobs Worksheet . . .
(c) . . . you may check this box."

Also note that the instructions for Step 2 say "Option (a) most accurately calculates the additional tax you need to have withheld."

Use the Tax Withholding Estimator. It will solve all your problems.