When filing as single most of my working years I'd normally receive a tax return of around $3,000 from State and Federal combined. I was always ok with that as I looked at it as an end of year bonus of sorts. ==========>>I understand what you mean ; in general, you can see, your tax refund should not be considered free money/ sort of year end bonus or etc. Aslongas you do receive a large tax refund, you are essentially giving the government a tax free loan;so, once you usually receive a large refund, it would be wise to look at your deductions you have marked on your W-4 with your employer to increase your withholding allowances on your W4.
Now I'd like to make it to where we are not paying as much during the year but still not owe any money at year end either. =====>> Agreed but it is really hard to do that even if Form W-4 allows you a degree of control over how much of your income you want to subject to those federal taxes by controlling the amount of withholding allowances you can claim on your paycheck. How many W-4 allowances you should claim is usually followed by many more questions, each more detailed and complex.
Ideally, about $500 combined refund (filing Married, one child) would be great.====> it depends on each TP; you can submit a new Form W-4 at any time during your employment in order to change your withholding allowances on your W4.
1. Am I claiming too much by changing my W4 to 3 exemptions? Should my wife and I both claim Married 3 exemptions?=====> I guess you may report 2 allowancws on W4. however, you should follow the instructions on your W-4 form based on how you plan to file. More than likely, mfj will be the best financial decision. You should make that decision now when completing your W-4 form in order for the math to work out right when you file your taxes early next year. you may download Form W-4 from the IRS Web site, and you can type your information directly onto your document, on your computer; Look over the two pages of the Form W-4,you are ready to begin figuring out how many withholding allowances to claim.
2. For our 2015 tax filing we will also be able to claim a dependent (child) deduction. As this is our first child I don't know much about what that will or will not do for us.===>your child ‘d decrease your taxable income by $4K for 2015 on your federal return 1040 I mean; however, your W/A on your W4 may be different from the number of exemptions you claim on your actual federal return. Exemptions are claimed on your Form 1040. They reduce your taxable income $4K each for 2015, and, therefore, your income tax liaiblity. You are allowed one exemption for yourself, one for your spouse, and one for each qualifying dependent. HOWEVER, Allowances are claimed on Form W-4 .Each allowance you claim reduces the amount of your income that is withheld for taxes. The point of Form W-4 is to help your employer estimate how much tax you’ll owe on the wages they pay to you, so that they can withhold the appropriate amount from your paychecks.So, the link between the two concepts is that the maximum number of allowances you can claim depends on the number of exemptions you’re allowed to claim , though, if you want, you can choose to claim fewer allowances than the amount to which you’re entitled.In other words, choosing not to claim the maximum number of allowances on your W-4 will only increase the amount of income tax withheld from your paychecks. It will not have any effect on your ability to claim the appropriate number of exemptions on your Form 1040.
How will this deduction effect our W4 claims choices, if at all? I.E. does it allow for us to claim 3 (if is is not a good idea otherwise) given our desire to not owe any money when we file for 2015?====>>> your child claimed on your tax return is often not the same as allowance on the Form W-4. Allowances on the W-4 are designed to reduce your income by the amount of non-taxable income calculated on your tax return. For instance, a single person not supported by someone else who has one job and rents an apartment alone with no investment income or self-employment income would be allowed to claim a dependent allowance for themselves on the 1040 form. They would also be allowed to claim a standard deduction. For 2015, the standard deduction is $6,300 for singles. The allowance value is $4k for 2015. For this scenario, the individual would claim ($6,300+$4,000) $10,300/$4,000 or 2 allowances on a W-4 form. For those who itemize and have additional dependent, the calculation still requires someone to determine the income not subject to tax itemized deductions, student loan interest, dependents, etc. and divide it by the value of an allowance. The object is to get your tax withholding from your paychecks to match what you actually owe which is calculated on your 1040 Form. You don’t want a big refund, and you definitely don’t want to have a big additional tax bill!So, if you decide to claim more allowances than are valid for your situation, you will end up not paying enough tax through withholding for the year. This is not a smart move, and could subject you to underpayment penalties, and even interest! While a case could be made that it is legal, you must verify when you submit a W-4 to your employer that the number of allowances you are claiming is valid for your situation under penalty of perjury. Proper management of your withholding on W4 will keep the money that is yours in your pocket instead of providing an interest-free loan to the government.