Can I increase my W-4 allowances even if I don't qualify?
August 15, 2003
Date: Wed, 09 Jul 2003
Subject: Tax question...
I currently have 2 allowances for my federal W2 information. I believe I put one for single, and one for no dependents. Am I allowed to increase those allowances, even though I might not qualify for more than 2? Or, can I say I am exempt?
The situation is that I can't afford having this much taken out for taxes (there is A LOT being taken out!), and I would like to instead pay backtaxes come April. My main concern is not to do anything against the law, so please tell me how to proceed in this matter.
Date: Fri, 01 Aug 2003
Practically speaking, you can claim up to 10 allowances and no one will do anything about it. You have to satisfy certain requirements to claim "tax exempt". See the instructions for Form W-4. You will be subject to penalties for underpayment of estimated tax unless you prepay the lesser of 100% of the tax on last year's income tax return or 90% of the tax on this year's return. (I'm assuming you have less than $150,000 of adjusted gross income.) The penalty rate right now is low.
Do you really want to set yourself up to need to scramble to get the money to pay your taxes on April 15?
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links