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View Full Version : Is there any real perk to claiming zero on w4 forms?



Fashionista
06-01-2007, 03:49 PM
My parents and some other people I know are big on the "claim zero" rule so that you can get a lot of money back at the end of the year. But all I can see is uncle sam getting an interest free loan and you being really broke all year round and being guarenteed you don't owe anything.

I figure since most people need money to live off of in the here and now should claim 1.

Is there any real perk or is this imaginary?

wordsmith
06-01-2007, 04:38 PM
My parents and some other people I know are big on the "claim zero" rule so that you can get a lot of money back at the end of the year. But all I can see is uncle sam getting an interest free loan and you being really broke all year round and being guarenteed you don't owe anything.

I figure since most people need money to live off of in the here and now should claim 1.

Is there any real perk or is this imaginary?

For some, more certainty of not owing anything is reason enough. For some, it's a guarantee that some money you might not otherwise bother to save on your own is being pulled out for later.

workaholic?
06-01-2007, 04:59 PM
i think it kind of depends on how much money you make. if you make a good amount of money, you may be better off putting "0" on your w4 as assurance that you won't owe anything at the end of the year. if you make more of an average salary for our age, you can probably claim your 1 exemption and you'll be fine. for me, i know that if i claimed 1, i would most likely adjust my living to that extra amount of money and not save it, and with my salary, i would probably end up having to pay taxes at the end of the year. as it is, i get back a good chunk and use it to pay off large portions of my student loans or put it toward my car. i think it's easier for me to put those large sums toward something substantial than it would be to use the smaller amounts i'd get on my paychecks toward something useful.

redav
06-02-2007, 12:02 AM
From an economic view, there is no perk.

From a psychological view, some people do get a positive from it. There are many people who are not good as saving. For them, even an automatic zero-percent savings plan is better than nothing. If they did not claim zero withholdings, they may find themselves owing the govt and then get stuck in the position of having to come up with a considerable amount in a short period of time.

There is also the feeling of new-found wealth. Who doesn't like to wake up and find a big lump of cash deposited in their account? Although they actually have less, they feel better. It may not be logical, but logic doesn't always make people happy.

capella
06-02-2007, 09:45 AM
For me... when I claimed 1 exemption I ended up owing the gov't money. That was a kick in the pants. I think it's because I'm married, have no kids, spouse makes almost the same as me, and we don't own such an expensive house that the interest/property taxes make a huge difference in our income taxes. I started claiming 0 after we got slammed with a $2000 tax bill. We'll see if one of us has to go back to 1 after next tax season. Right now we're both claiming 0 and hoping we don't owe (that can't possibly happen now right?). Taxes, blech!!

winneythepooh7
06-02-2007, 11:27 AM
I claimed 1 once before as well and ended up owing like $2k as well. I always claim zero now as well because I don't want to have to come up with that money every year.

Fashionista
06-03-2007, 12:09 PM
for those that owed when claiming one were you making more than 30k a year?

Most of the people who are big on the claim zero are people who make less than 30k and usually end up using the money to catch up on bills and such which seems to ust defeat the purpose of claiming zero.

winneythepooh7
06-03-2007, 12:13 PM
I can't remember. I probably didn't make more than that because it was at either my second or third job out of college and before I got my Master's.

capella
06-03-2007, 01:00 PM
Just over 30K (about 33K). But combined with my husband it was like 66K. I still don't know why we owed so much.

civicmon
06-14-2007, 12:16 AM
I claimed 1 once before as well and ended up owing like $2k as well. I always claim zero now as well because I don't want to have to come up with that money every year.
I do the same thing.

I'd much rather get a large refund. People say "oh, interest free loan to the gov" but i look at it more in the sense that I can do a LOT more with $2000-3000 that I get back then I would as an extra $100 a check.

I can't entirely control the withholdings either since a good portion of my pay is 1.5x overtime pay which is withheld at that hourly rate's tax bracket but refunded when i'm taxed at the lower rate.

my brother got a $5000 refund on less than $50000 made, and 18k of his income was overtime.

Krishna
06-14-2007, 12:26 AM
I claimed 2 for my summer job. I haven't decided what I'll do yet this fall.

vxmike
06-14-2007, 01:45 AM
I do the opposite - claim a very high number. I'd rather owe several thousand at tax time.

I get to save the money and earn interest all year rather than give the IRS an interest-free loan. I also pay my tax bill with my CC and get a ton of frequent flyer miles.

shorty
06-16-2007, 02:11 AM
I agree that it has a lot to do with how you deal with money. I claimed '2' last year and ended up owing money. But it wasn't a big deal because I try to manage my savings pretty well. Even after paying what I owed, I came out ahead due to the interest earned.

For some people though, it might be better to claim a smaller number so they know they won't spend money they don't actually have.