How should I complete W4 upon birth of newborn child?

[kjmi]

We were was blessed with a son on 11/04. Currently, number of exemptions in my Federal and Michigan state W4 are 3. Should I bump this to 4? Also, how should I answer Tax Exempt Indicator question- "exempt, reportable" or "no exempt"?

[bluedeb · Accepted solution]

Congratulations!  The more allowances you put on your W4 the less taxes are taken out.  If you have been getting a big refund you can change it to 4, but if you have been owing taxes or get a very small refund you may want to keep it to 3.  If you are not exempt you would choose no exempt.  See the following for more information regarding a W4

Withholding Exemptions - Personal Exemptions - Form W-4

https://www.irs.gov/Individuals/International-Taxpayers/Withholding-Exemptions---Personal-Exemptions...

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Note:  When you claim your son on your 2015 tax return, when it asks how long did he live with you, select the Whole Year.  A child who was born during the year (even if on the last day) is treated as having lived with you all year

[kjmi]

Thanks for the response. Given that I have been getting significant refund, I will change my allowances to 4. My employer has two W4s- Federal and MI state. Should I change in both?

[bluedeb]

You can change both, it will mean more money in your paycheck and less of a refund.  Don't forget State's are different than Federal, you might want to make sure you won't owe your State when you file.  You can check your State's website for information on exemptions and taxes.

[bluedeb]

Also, changing your W4 now will not have much of an affect on your 2015 return since we are at the end of 2015.

[kjmi]

Sorry, one more question, does the law require to change allowances within a certain number of days after a life changing event like birth of a child? Given that the baby was born in November of 2015, does it make sense to change allowances/exemptions now or wait until January 1, 2016. Please advise.

[bluedeb]

There is no law that says you have to change your W4.  Your W4 is only to determine how much taxes are taken out of your paycheck.  You don't have to change it at all and you can wait to 2016 if you want to change it.  What is on your W4 does not have to be the same as what you file on your tax return.  The W4 is only for taxes taken from your paycheck.