I started a new job in March 2018, and I filled out the W-4 claiming eight exemptions. So far, I have not payed federal tax for this job, and they said it’s because I am claiming too much. I am married filing jointly, and my wife doesn’t work. I have three kids, and my average earnings per year are around $40,000. I have always claimed seven or eight exemptions, and had some money come out in federal taxes, but when I file my taxes I end up getting a ton of money back. Should I lower the eight to six so some money comes out of my check, or am I doing it right?
Your federal tax liability should be 0, and you should receive a refund due to the refundable portion of the child tax credit. I am assuming here that your children are all under age 17. Even if you lower your exemptions to 6, there will still likely be no tax withheld. That said, the number of exemptions should be lowered because eight is not the correct number. You should change it to five, and there probably still won’t be any federal tax to pay.
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Answered by: Susan D. Jarvis, CPA, is a sole practitioner in Nazareth, Pa.