Withholding and W-4

Today TaxMama hears from Ron in Wisconsin who tells us. “I just got a job working full time for a salary of $18,000 per year. My wife does not work. We have 4 kids at home. How many dependents may I claim on my W-4 to avoid losing a bunch of money every week in taxes?”

Dear Ron,

If that’s all you’re earning, and your wife isn’t working, you won’t owe any income taxes at all for the year. Put 10 dependents on your W-4.

You won’t have any income taxes taken out. But they will deduct Social Security and Medicare taxes (7.65%) and perhaps some local taxes.

In fact, with your income level, you’re apt to qualify an earned income credit – that’s like a negative tax – where IRS gives you money. Instead of waiting until you file your tax returns next year, you can get some of that money now – when you really need it.

Read the instructions to Form W-5 – Earned Income Credit Advance Payment Certificate

http://www.irs.gov/pub/irs-pdf/fw5.pdf . Fill this out and turn it in to your payroll department.

And remember, you can find answers to all kinds of questions about withholding and other tax issues, free. Where? Where else? At TaxMama.com

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