I apologize if I am simplifying or not understanding this correct so bare with me.

I am getting a decent amount of money back around tax time as a refund and I would like to see more of that money up front for expenses for child care, mortgage, car payments, etc.

How do I get closer to $0 owed or refunded around tax time so I can use my money instead of the government using it all year?

Can I increase the number of dependents I declare to try to offset some of that money I get returned?

  • 4
    Semantic nitpick: You can change the number of allowances on your W-4, but not the number of dependents.
    – D Stanley
    Feb 12 '18 at 19:23
  • For a lot of people, getting a larger refund is like forced savings. Had they received the money all year long, they would have spent it. Feb 12 '18 at 23:22
  • Yes Bob. The best tax refund story of my life? Coworker who bragged to me how his tax guy got him a $5000 refund. This joker didn’t have enough monthly cash to deposit to his matched 401(k), so while I ended the year owing a few hundred dollars, I also had $10K more in the retirement deposit. Feb 13 '18 at 0:10

If you are employed and are having taxes withheld from your paycheck, you complete a new W-4 (talk to HR) with a higher number of allowances, which will result in a lower amount of withholdings.

Be advised that it is a misdemeanor federal offense to falsely claim withholding allowances on the W-4. Don't claim an allowance for being married if you're single, etc.

Furthermore, if you end up withholding too little, such that you have to pay $1,000 or more in taxes when you file (as opposed to getting a refund), you may have to pay estimated taxes for the following year: see Form 1040-ES

  • 1
    So OP should jack it up for maximum benefit? You could improve this answer by mentioning the limits/downsides of this.
    – Hart CO
    Feb 12 '18 at 19:42
  • 1
    Be advised that it is a misdemeanor federal offense to falsely claim withholding allowances on the W-4. could you clarify if you are saying it is illegal to claim more allowances than the worksheet arrives at, or that you cannot knowingly claim an excessive number such that you owe a lot at the end of the year?
    – Matt
    Feb 12 '18 at 21:28
  • 1
    I'm a little confused, are you saying I should increase to compensate or is it a misdemeanor? Feb 12 '18 at 21:29
  • 1
    @jacksonecac It's a misdemeanor to use a false claim to increase allowances. So, for instance, there's a line that asks how many dependents you have. If you have one dependent, but you put on the form that you have five dependents, then you've committed a misdemeanor. Magua is saying that you should claim as many allowances as you are legally entitled to, but shouldn't claim any allowances you aren't entitled to. That is, you shouldn't claim an allowance if you have to lie to do so. Feb 12 '18 at 23:22
  • 1
    Underpayment in one year does not mean estimated payments are required the following year.
    – Hart CO
    Feb 13 '18 at 0:07

The instructions for Form W-4 include a worksheet to adjust your allowances based on deductions and adjustments at the top of page 2. This worksheet is based on estimates so there's no set maximum number of allowances, but you should use reasonable estimates on the worksheet to calculate the proper number of allowances. If you claim too many allowances and end up owing more than $1,000 then you are subject to interest and penalties for underpayment.

That said, I don't believe a 2018 W-4 is finalized yet, I only see a draft version. Depending on how you are affected by the new tax law, you may not need to make adjustments to withholding. You could either wait until next year to adjust allowances based on the outcome of your 2018 return, wait until the 2018 W-4 is finalized and adjust then, or take a best-guess now and keep an eye on it over the course of the year.

The misdemeanor charges referenced in the other answer would be in extreme cases where you choose a number wholly unsupported by reasonable (good-faith) estimates (ie the worksheet suggest 5 allowances and you choose 15) with the intent of avoiding taxes. Criminal charges are not an issue if you make reasonable estimates and are off by a bit.

  • The draft 2018 W-4 at that link is from August 2017, long before the tax bill, so it is completely useless.
    – prl
    Feb 14 '18 at 5:50
  • @prl And it's got x's where figures should be, any non-final tax form is pretty useless, the often just show the format.
    – Hart CO
    Feb 14 '18 at 6:02
  • Agree they will go for misstatement penalty only in egregious cases, but the underpayment penalty on form 2210 (which really is interest although they don't call it so) is avoided if your balance due is less than $1k or less than 10% of liability, or if your payment covers 100% of prior year's tax (110% over $150k AGI). Also: if you persistently underwithhold, they can issue a 'lock-in' letter which requires your employer to withhold at a rate specified by the IRS, ignoring your W-4 (unless your W-4 actually specifies higher withholding); see pub 505. Feb 15 '18 at 0:39

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