I have owed taxes the last few years and I think my wife and I should change our w-4. We have 2 children and I make a little more than my wife. Do you have any suggestions on what we should claim on our w-4 in order to not owe so much at tax time?
Hi Chrsm801, It can be tricky finding that sweet spot of tax withheld to not owe tax and not receive too large a tax refund! Since you are both working, and have two dependents, it is a good idea to make sure you are both not claiming both dependents on the Form W-4.
If you need more tax withheld, than one of you could submit a Form W-4 with no dependents, which will increase the tax withheld, and then reduce your tax due when filing your tax return.
Once you complete the form, give it to your employer. Then, keep a close eye on your next few paychecks to see how the changes impacted your federal income tax withholding. You can compare your 2021 total tax from your 2021 tax return to the year-to-date federal tax withholdings from each of your most recent paycheck to see if you are getting closer to the total tax you need withheld. Keep in mind it is late July, so may take a few pay periods to notice a cumulative increase.
If you find you still need more withheld, you can put an amount on Additional Withholding in Step 4 (c) – Extra Withholdings to be withheld each pay period.
I hope you find this helpful!
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Standard rule of thumb I have used in the past still holds true ... the lower wage earner fills in the W-4 choosing the SINGLE filing status and NOT entering any kids at all. Then the higher wage earner chooses Married Joint and can either claim the kids or not depending on what you need to be withheld. To have the max withheld both spouses claim SINGLE with or without the kids on the higher wage earner... this will force a higher refund.
Use the Tax Withholding Estimator on the IRS web site to figure out what you and your spouse should each put on the W-4 forms that you give to your employers. It's much easier than using the worksheets on the form. It will let you adjust your withholding to get the approximate refund amount that you want.