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I receive pay stubs from my employer semi-monthly. Taxes are paid automatically based on W-4 form. I pay taxes jointly with my non-working wife, so I set 3 as number of allowances on W-4 form.

In March my son was born, so I updated W-4 form by setting 4 as number of allowances.

As I know from tax filling perspective it doesn't matter at which month the baby was born. That means I paid more taxes than needed during January and first half of March.

If I do nothing I will likely receive refund after I fill tax refund early next year. Instead I want to get that extra money back as soon as possible for investment purposes.

To solve this issue I came up with idea to temporarily (for next one and half months) increase number of allowances on W-4 form to 5. As result I will pay less taxes than I obligated to pay and it will cover extra taxes I paid previous one and a half months.

Question: Is above idea legal / appropriate? If not, do you know any other ways to get back overpaid taxes without waiting tax refund filing season early next year?

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    Keep in mind, one exemption is $4000. In the 25% bracket, that's $1000 less tax. Assuming you were withholding the exact right amount before, you'll get about $250 back if you make no further changes.
    – JTP - Apologise to Monica ♦
    Commented Mar 28, 2017 at 1:40

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Yes it is legal and appropriate. You use the exemptions on the w-4 to try and make the amount you owe, or the the refund you will get to be near zero.

It isn't an exact science because in some companies you need to have a person in payroll make the change, and if they delay it by a week your calculations can get messed up.

The rule of thumb is that each exemption equals an extra person on your tax form. So if you take that number and divide it by the number of pay checks in the entire year that is how much each check has it's taxable income lowered. If you then know the tax bracket you are in, then you know how much each paycheck will go up due to the lowed federal tax.

You can make multiple changes to your federal and state W-4 forms during the year.

Other tax related items with a new child: the child tax credit, and the possible change in insurance premiums, and don't forget if you put money into a 529 that might save you money on your state taxes.

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