How to Fill Out the IRS W4 Form & Not Perjure Yourself

EmployeeIf you’ve just started a new job and you’re wondering how to fill out the W4 Form, here’s how to go about it.  IRS Form W4 controls how much withholding is performed on your paychecks.  It doesn’t control your salary.  If you try and manipulate your W4 form so that your paycheck is bigger, you’ll just have to pay it back at tax time.  If the way you fill out your W4 form results in having an extra large IRS refund, that’s not good financial planning either because you’re just giving the IRS your money for no reason, and you won’t get it back until you file your federal income tax return.  You’re giving the IRS an interest-free loan.  It’s your money so why should you fork it over to the IRS just because you didn’t fill out your W4 form correctly?  An IRS refund is not a gift from the IRS, it’s your money that you should have had in your paycheck all along.  If you need to over-withhold so you get a big IRS refund “bonus” every year, then you should probably take a financial planning class or talk to someone who can set you straight.  You are losing money by doing this!

The W4 Form’s Personal allowances Worksheet

The more allowances you enter, the less money is taken out of your paychecks.  Everybody gets a “1″ on line A unless they are claimed as dependents.  College students and other young adults, check with your family and see whether they are claiming you as a dependent.  They might be, since this brings great tax advantages for them.

The more kids you have, the less withholding is performed on your paychecks.  There are scammers out there who put down on the W4 (line D) that they have tons of kids.  This results in hardly any money being taken out of their paychecks.  This is a bad idea for several reasons, including that it’s lying to the IRS and therefore considered tax fraud.  But also,  when you go to file your income tax return you’ll owe the IRS a TON of money.  Of course, if you don’t file your taxes then you have nothing to worry about!  (Again, not a very good idea, for SO many reasons).

Are You Really HEad of household?

Head of household means you pay more than half the bills in a house.  For roommates, claiming head of household is not really what the IRS had in mind.  However, if you paid more than half the cost of keeping up a house (rent, utilities, food eaten at home, etc) and someone in your household is a qualifying person, go for it.  You get another allowance on the IRS W4 Form.  But here’s the tricky little rule…

What’s a Qualifying Person?  A relative, that’s what it is.  Unless you can claim someone in your household is a relative, no dice on claiming an allowance on Line E as Head of Household.  Let’s say your cousin and you share an apartment.  Your cousin is out of work so you pay most of the bills.  If he lived with you for more than half the year under these circumstances, yup you are Head of Household.

Lying About the Future On the W4 Form

Some lines on the Personal Allowances Worksheet ask you to think about your future.  For example, if you have a lot of child care expenses and you plan to claim a tax credit for these expenses, the W4 asks you to Enter “1″ on line F.  Well of course you could always say yes I plan on claiming the child care expenses tax credit, even if inside, deep down, you know it’s never going to happen.  Another way to scam the IRS.  But really, it’s a terrible idea, since it will lead to being sued by the IRS.

You could also say that you think you won’t be making over $65,000 this year, even though you know that to be a lie.  This would allow you to enter “2″ (a double!) on line G, for each child you claim you have.  Now, if you lie about your children too you could really rack up some allowances here.  And of course, let me remind you this is a terrible plan since you’ll have to pay it all back when you file your taxes unless you want to live outside the law for the rest of your life.  Oh, and if you plan on collecting Social Security or Medicare or any public social service like that in the future when you’re old and need money, forget about it!  You can’t cheat the IRS then turn around and ask for help because that would make you a total scumbag hypocrite loser.*

*Turns out that’s wrong:  Social Security and Medicare are not affected by any of the stuff in this article. Your donations to both are based on your base salary, before taxes, exemption, etc. In the case of SS, what you get out is based on what you have put in over your best 35 years. In the case of Medicare, everybody gets the same coverage after qualifying. For most people, the qualifications are 65 yo and qualified for SS (40 credits – you get 1 credit per quarter of paying in to SS).

Claiming Exemption From Withholding

Finally, on the actual W4 Form, on line 7 you can just say you shouldn’t have any withholding at all because you are so darn poor, and you were so darn poor last year as well.

By the way notice on the next part under Part &, it says

“Under penalties of perjury…”

You have to sign your name and this is supposed to verify that everything you put on the W4 Form is the truth.  If you lied, it’s perjury…don’t want to really mess with that, do you?

For a complete look at the IRS W4 Form go to the IRS website and you can see a blank copy, complete with W4 Instructions.