What would happen if you claim 7 on your W2 form?

[Mighty Thor]

I got into a debate with my dad the other day because I claim 0 on my W2 and he claims 1 for my mom.

But both of us are always paying taxes in the end, instead of getting something in return. Almost every year he pays 3000 and my wife and I pay 2000. Neither one of us are making much money so it's always a pain.

Anyway he's going to start claiming 7 because that's what his co-workers have been telling him. I told him not to do that. I think its a bad idea, but his co-workers said that they've been doing it for years and nothing has ever happen to them.

What do you guys think? This is not legal right?

[Kevin01]

Re: What would happen if you claim 7 on your W2 form?

Sure it is legal. You can claim whatever you want on you're W-2. My sister-inlaw claims 6 every year. But owes ALOT in taxes and makes payment, so claims 6 next year just show she can afford to make the payments the next year.

You're dad will get a few hundred extra every month in his paycheck, but if already owes 3k normaly will owe that plus the extra he gets now every month.

If you owe 2k now, why not ask you're employer to takea extra $150 every month out of you're paycheck then you will not owe anything. I claim 1, and just file for myself, my ex-wife claims my son at end of year normaly. I normaly get about $400k back on fed and $100 back in state. So works out well for me. It sounds like they are not taking the right amount out of you're paycheck if you owe, unless make money other ways you are not paying taxes on.

..Kevin

[WishIHad$$$]

Re: What would happen if you claim 7 on your W2 form?

Regardless of what you claim on your W-2, you will still owe the same amount of taxes at the end of the year. If you have to pay more taxes at the end of the year, unless you've earned interest on your money in the meantime you aren't any better off. If you are the kind of person who is fiscally responsible and can anticipate your annual income, claim higher and put the money into an interest bearing account. But be careful, the IRS will penalize you if you owe more than $1000 at the end of the year, or have paid less than a certain percentage (can't remember off the top of my head) ~95+ of the tax you have paid last year.

Interest rates are so low right now that it's almost not worth it to set up, you could only benefit $30-50 a year (before your marginal tax rate), unless your tax liability has gone up substantially since the previous year, and risk monetary penalties in the process.

[Mighty Thor]

Re: What would happen if you claim 7 on your W2 form?

Yeah, i told my dad it's really not worth it. I just got done talking to him and according to him his friends are claiming that they have 7 dependants and when truth they don't have any kids or 2 or 3 only.

I told him not to do it because i think that's illegal.

[Bonemaro]

Re: What would happen if you claim 7 on your W2 form?

Yeah... claiming 7 is just gonna make you owe more at EOY. That doesn't make sense.

[zlexiss]

Re: What would happen if you claim 7 on your W2 form?

There's a penalty for not having enough witheld from your payroll taxes. If you end up owing more than $1000 come April, it can hit you (there's a couple other conditions, like the $1000+ being more than 10% of your full taxes for the year).


http://www.fool.com/personal-finance...surprises.aspx
http://www.fool.com/retirement/retir...port010305.htm

Many sites like fool.com and money.cnn.com will have withholding calculators (just google for "withholding calculator") which will tell you exactly how many deductions to take to get your taxes as close to 0 as possible. Use one.

[XLR8myV6]

Re: What would happen if you claim 7 on your W2 form?

If you claim 7, the IRS can and will red flag you. I know, it happened to me. You have to justify claiming that many dependants. However, if you do get away with it, you will definitely have to pay more at the end of the year. If you don't have it, the penalties and late fees can add up to more than your original taxes. If you're going to try it just to get more money now, claim 5 so you don't wave any flags.

[ironranger]

Re: What would happen if you claim 7 on your W2 form?

Many sites like fool.com and money.cnn.com will have withholding calculators (just google for "withholding calculator") which will tell you exactly how many deductions to take to get your taxes as close to 0 as possible. Use one.

I think you can get one at IRS.gov also