We both work full time and don't care about a refund. Would the proper or correct answer be for each of our W4 claiming of allowances/dependents/exemptions - Myself claiming Married with 2 Dependents (myself and my daughter) with my employer and my wife claiming Married with 1 Dependent (for herself) with her employer?
It depends somewhat upon your respective incomes. Many married couples both claim "Married but withhold at the higher Single rate" and zero exemptions.
We file jointly and always will. We have been doing Myself claiming Married with 2 Dependents (myself and my daughter) with my employer and my wife claiming Married with 1 Dependent (for herself) with her employer and we get a small refund each year. We dont want to change it unless we are doing claiming incorrectly. would this calculation be correct? is ok to claim oneself as a dependent?
Unless either of your incomes has changed a lot, stick with what you have.
There is no "official" correct way. That said, you are essentially doing it correctly, as evidenced by coming out almost even ("small refund")
So does the IRS audit, know, or care what you put on the W4 form?
Not unless you are suntsantially underwithheld. See Lock in Letters here:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/taxtopics/tc753.html">https://www.irs.gov/taxtopics/tc753.html</a>
ok, so if I get a small refund from the IRS of about $200, and usually pay the state about a $200 each year which is a wash; the IRS wont audit, know, or care what we put on the W4 forms?
The IRS doesn't care what you claim on your W-4. Besides, they never see the W-4. The IRS only cares what you claim on your tax return when you file it, and that you pay your taxes if owed, at the time you file your tax return.
Most couples, if their only source of income is W-2 income, will claim on the W-4 at least 1 less than they are entitled to. This increases their withholding from each paycheck. That way, they are practically guaranteed a refund when they file at tax time.
If enough taxes are not withheld from each paycheck, it could result in you owing at tax time. If the amount you owe is substantial, then the IRS will assess an underpayment penalty for not having enough withheld from your paycheck throughout the year.
so Carl. ok, so if I get a small refund from the IRS of about $200 for federal taxes, and usually pay the state about a $200 each year which is a wash, would that be considered underpayment?
Not to the IRS. The IRS doesn't care about your state taxes. You're mixing apples and ketchup from the IRS perspective. Generally, and depending on your income, if you owe more than $1000 to the IRS at the time you file your taxes, you didn't have high enough withholding on your paychecks. They'll assess a penalty. Note that $1000 is NOT a fixed figure. I pulled it out of thin air. That number depends on your overall household income.
Actually $1000 is a fixed figure. If you owe less than $1000, the IRS will not assess a penalty*. States have a similar fixed figure but they are not all the same. Most use $500 or more. So, you should be safe owing $200. Even if you're not, the penalty is minuscule.
*even if you owe more than $1000, there are exceptions to the rule.
How can you find out the fixed figure minumum amount of each state is? I am in Utah.
I'm not from Utah. Having looked at instructions for many states, I thought I could find a quick answer at their web site or form instructions. I didn't. The good news is it appears Utah does not assess an underpayment penalty at all (unless you pay after the filing date). See <a rel="nofollow" target="_blank" href="https://secure.utah.gov/taxpic/pic/index.html">https://secure.utah.gov/taxpic/pic/index.html</a>
ok thanks. So if there was a penalty assessed. Do they just mail you a bill after you file your taxes and send paynet for example of $200?
<a rel="nofollow" target="_blank" href="http://incometax.utah.gov/filing/extensions-and-prepayments">http://incometax.utah.gov/filing/extensions-and-prepayments</a>
Where does that say it on the link Hal_Al. thanks. Also Sweetie Jean, I am not sure what your link is referring to. Sorry I am new to this.
SweetieJean, that link appears to be only for late filers and late payers, even those who filed extensions, not those that file and pay by the due date.
disgus1515, the link I provided is a penalty calculator, that the Utah tax agency requires you to use to calculate the form TC-40 line 41 penalty. Plug in any numbers and you will get zero penalty, if the dates you enter are before April 15.
Ok thanks Hal. So if i understand correclty, there are no penalties for underpayment with the state of utah as long as you pay the state of utah ehat you owe and file on time before april 15th of each year, even if I owed them like $3000, correct?
ok thanks Hal. just curious, if there was a penalty assessed for something. Do they just mail you a bill after you file your taxes? Or how does it usually work?
I cannot give you a Utah specific answer. In most states, you have a choice. You can use the state's penalty form and calculated the penalty (TurboTax can do that) and submit it as an attachment to your return or just wait and see if the state bills you.
Understand that the W-4 goes to your employer only. The IRS never sees it. Ever. They employer uses that form to determine how much tax to withhold from your paychecks. If W-2 income is your ONLY SOURCE of income, then both of you can claim a maximum of 3 exemplions. One for yourself, one for your spouse, and one for your dependent child that lives with both of you, assuming you both live under the same roof.
If you claim less exemptions, that just means the employer withholds more from your paychecks. Then when you file your joint return claiming your self-exemptions plus your dependent child, you are practically guaranteed a refund.
We have been doing Myself claiming Married with 2 Dependents (myself and my daughter) with my employer and my wife claiming Married with 1 Dependent (for herself) with her employer and we get a small refund each year. So we can really put anything we want since the IRS will never see it? So I guess it is ok to leave it how it is?