Withholding Allowances

Forum|Forum|5 years ago
July 21, 2021
2 replies
22 views

Our baby was born in April 2019 and then my partner and I were married in Feb 2020. We had adjusted our allowances in late 2019 to reflect our baby but haven't touched them since we got married. Although our dependent isn't "new" I'm hoping to receive some guidance on how many allowances each of us should withhold on our W-4s. We got such a small return for 2020 compared to previous year when we weren't married. What is best way to balance income with receiving a decent return now that we're married with one child? What other deductions are there for the child? We use TurboTax for our taxes so I know we are walked through the steps, but is there anything else we're not thinking of? We used the Child Tax credit and the Dependent Care credit and still got such a small return. Is that due to being married or how many allowances we are withholding from our paychecks?

Thank you

rjs

Level 15

The new W-4 form for 2020 and later doesn't use allowances. It works differently. Use the Tax Withholding Estimator on the IRS web site to figure out what you should each put on the W-4 forms that you give to your employers. It will show you how to adjust your withholding to get the approximate refund amount that you want.

slaudenslag

Level 4

Hello!

Sounds like your 2020 refund was smaller than in prior years. The most common reason for a reduced refund is related to the amount you are having withheld from each paycheck. Filing as a married couple can affect the refund amount due to the combined income but it is generally beneficial to file Married Filing Jointly (MFJ).

The IRS changed the W-4 form in 2020 to help individuals withhold federal income tax more accurately from their paychecks. Please see the following article describing the changes made to the W-4:
https://turbotax.intuit.com/tax-tips/irs-tax-forms/the-w-4-form-changed-in-major-ways-heres-whats-different/L611CpnaP#:~:text=In%202020%2C%20the%20W%2D4,your%20W%2D4%20with%20confidence.

I also want to provide you with the following IRS Tax Withholding Estimator Tool to assist you in preparing new W-4 forms that you and your spouse can update with your employers. Please keep in mind, that the tool will help you withhold an accurate amount to cover your tax liability for the year rather than calculating to maximize your refund. I know it's nice to get that big refund but a "perfect" tax year is one were you owe $0 and your refund is $0! Here is a link to the Estimator Tool: https://www.irs.gov/individuals/tax-withholding-estimator

With regards to your child, it sounds like you are taking advantage of the credits available (Child Tax Credit and Dependent Care Credit). TurboTax does a great job walking you through these two credits. The next credit available for your child is COLLEGE which I'm guessing you are not ready to think about yet!

I hope I have fully answered your questions. Please reach out again if any other questions arise. Thanks for joining us today!

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