What should someone like myself, claim on their taxes?

SPC(P) Private RallyPoint Member — Tue, 31 May 2016 10:09:08 -0400

I'm fully aware most of you aren't tax professionals, but I still want to ask. I'm 21, no dependents, and I have rent, insurance and a car payment. Im currently claiming 0, but I'm thinking of claiming 1 and investing the difference. Would you recommend this?

Response by CW4 Guy Butler made May 31 at 2016 10:13 AM

CW4 Guy Butler — Tue, 31 May 2016 10:13:52 -0400

Is this a W2 question?

Response by SPC Private RallyPoint Member made May 31 at 2016 10:53 AM

SPC Private RallyPoint Member — Tue, 31 May 2016 10:53:23 -0400

I have claimed one before using Mypay. All that means is that you will see your money now then later. At the time I file taxes I pretty much only get back $400 which really isn't too much. I'm paying for a car, motorcycle and insurance. It's ok I mean. I can save but it's really like $200 to $300 a pay check if I don't go out and eat dfac.

Response by COL Jason Smallfield, PMP, CFM, CM made May 31 at 2016 11:00 AM

COL Jason Smallfield, PMP, CFM, CM — Tue, 31 May 2016 11:00:39 -0400

A few thoughts:
- Tax Refund. Anyone who receives a tax refund at the end of the year and is excited about "free money" is ignorant. What they really did was give the government a no interest loan of their money throughout the year.
- Number dependents. I personally do not believe the number of dependents claimed should be an actual number based upon real dependents but rather should be a deliberate and proactive decision based upon your personal goals for taxes. My personal goal is to either be at zero balance (owe nothing, receive nothing at tax time) or to owe the US Government a bit of money. I therefore claim the number of dependents required to meet this goal.
- Financial Professional. Even if your taxes are easy (no dependents, no property, no special investment vehicles), you should still consult with a financial professional (not a tax professional) in order to develop an overall financial plan and then figure out your taxes to support this plan.

Response by Sgt Private RallyPoint Member made May 31 at 2016 11:03 AM

Sgt Private RallyPoint Member — Tue, 31 May 2016 11:03:58 -0400

Below is information on adjusting the withholding on your W4. I would not claim a dependent that you do not have.

https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Forms/Top-5-Reasons-to-Adjust-Your-W-4-Withholding/INF14437.html

Top 5 Reasons to Adjust Your W-4 Withholding - TurboTax Tax Tips & Videos

Common lifestyle changes, like getting a job or getting married, can change your tax liability. To avoid being caught off guard by an unexpected tax bill or huge tax refund, you'll need to adjust your withholdings on your paycheck.

Response by LTC Paul Labrador made May 31 at 2016 11:07 AM

LTC Paul Labrador — Tue, 31 May 2016 11:07:43 -0400

The number you claim usually washes out in the end. You claim 1 you have less taxes taken out but you may owe more in the end. Claim none, you get more taken out monthly, but you get a refund at the end of the year.

Response by Capt Tom Brown made May 31 at 2016 11:25 AM

Capt Tom Brown — Tue, 31 May 2016 11:25:36 -0400

Can't resist the opportunity to encourage any young SM to put something away each month into savings of some sort. The TSP is probably one of the best things a SM has going for them nowadays. In the meantime take the standard deduction, & claim yourself until you have more deductible expenses or fall into an inheritance.

Response by LTC John Shaw made May 31 at 2016 11:29 AM

LTC John Shaw — Tue, 31 May 2016 11:29:10 -0400

Claim 1 and start TSP of at least 5% with the tax difference, you will not get as large a refund.

Response by Capt Private RallyPoint Member made May 31 at 2016 11:49 AM

Capt Private RallyPoint Member — Tue, 31 May 2016 11:49:55 -0400

The answer to your question is that it is a personal decision. At the end of the year you will file a tax return and the amount of taxes you will pay will be the same regardless of when you paid them. One pitfall is that if you wind up not paying enough through the year you could face a penalty and the penalties can be very significant.

So do you want to pay more each month and assure no additional taxes at year's end or pay less and maybe have additional to pay in April?

Your choice.

Response by SSG Private RallyPoint Member made May 31 at 2016 2:31 PM

SSG Private RallyPoint Member — Tue, 31 May 2016 14:31:58 -0400

Its hard to make this decision for someone else.

If we say yes, claiming 1 or 20 is a great idea because you can invest the money you save, you could very likely end up owing tax money. Then its our fault for advising you to do so.

Yes, claiming 1 will have less taken out of your checks. It is likely, unless you make a lot during the year (>$45,000) that you will even out at tax time.

However, some people love getting tax refunds in Feb. I know several families that actually claim 1 or 0 to get a larger refund and bank on a tax refund. This is silly. A refund means you overpaid the entire year and are just getting your money back.

Really its your call, but if you claim 5 and have next to nothing taken out per pay check, be ready to pay some in April.