Federal Withholding Question! 20 Y/O Daughter

My twenty year old daughter just got her first partime job. As she is a student living at home, we will still claim her as a dependent. She will make a total of about $5000.00 this year. I assume that she will not have to pay any Federal income tax on that amount of income? If that is the case, what does she put on her W-4 so that she gets no income tax withholding.<br /><br />As usual, the form is contradictory. One place says you can't claim "exempt" if A) you make over $800.00 and B) if someone else can claim you as a dependent.<br /><br />In another place, you can claim "exempt" if A) you had no Federal income tax liability last year, B) If this year you expect a refund of all Federal income tax withheld because you expect to have no tax liability. <br /><br />If no taxes will be due on that amount of income should I have her claim "exempt" regardless of the first set of statements or have her claim 5 personal allowances?

Re: Federal Withholding Question! 20 Y/O Daughter

From my understanding and what my Father did for MANY years. On the W-4 you can claim as many dependents/exceptions as you want (The more you claim, the less they take out) as long as you claim the correct amount on the 1040.<br /><br />Hope this helps.<br /><br />craig

Re: Federal Withholding Question! 20 Y/O Daughter

The tax laws are very convoluted at best. Some people spend their entire life studying them and can’t agree on the meanings. When it comes to the IRS, you have two viable choices, stay completely and totally off of their radar or go balls-out, heads up with them. Nine out of ten people that go heads up and hold their ground prevail.<br /><br />The IRS would like you to believe there is no legal way to avoid paying taxes on income. If you daughter has income, either you or her is going to pay the taxes on it. This is my understanding of your situation:<br /><br />If you claim your daughter as a dependant, you must claim her income on your filing. If you don’t claim her as a dependant, you don’t get that credit but you’re also not responsible for her income, but she is liable for any income tax IF she meets the minimum income standard.<br /><br />You should weight the loss of her status as a dependant against the amount of tax you will have to pay on her income if she is a dependant, 28% of $5000 minimum.<br /><br />She can avoid federal income tax withholdings by checking the box that says she does not expect to have any tax liability. The form is required to be forward to the IRS. Don’t worry about it, there are tens of thousands of them sent in monthly and you daughter isn’t going to raise any flags. It is NOT legal to check the box for zero withholdings IF you expect to have any income tax due at the end of the year. The advice above from Mercury104-I6 is incorrect. On the other hand, the IRS works on a two-year cycle and all they want is money. If Mercury104-I6’s father was paying his taxes within two-years of being due, he would never hear from the IRS. If you have any doubts, ask someone that prepares tax returns.<br /><br />EDIT: after thought: there may (or may not) be another advantage to having your daughter file her own return with a zero total tax liability. That advantage may come the first few years she becomes a serious wage earner…she may be able to income average the years with no taxes paid. I’m not sure, you should definitely check with someone that does tax returns.

Re: Federal Withholding Question! 20 Y/O Daughter

Does your daughter go to school? If so, I believe she can file "exempt". I did that all through college.<br />Bassy

Re: Federal Withholding Question! 20 Y/O Daughter

At age 20 she has to file her own return even if I still claim her as a dependent. I can no longer include any of her income on my tax returns. I will ultimately consult the accountant but she was supposed to turn her W-4 in tomorrow. In years past I have claimed an inflated number of dependents to avoid withholding but I wanted to make sure that she wouldn't owe any taxes at the end of the year. I think I'll just have her claim exempt and let the Feds come and lock her up if it was the wrong choice. <br /><br />Thanx for your responses.

Re: Federal Withholding Question! 20 Y/O Daughter

I have 3 kids... 30, 22 and 16.<br />The 22 and 16 are still here.....<br />22 works full time, pays no rent, does nothing around the house, stays outta trouble, doesnt really cause us any problems.<br />I fell I support him, at least 51%, as in room, board, phone, internet access, cable, etc.<br /><br />He makes more than the minimun for me to claim him on my return.

Re: Federal Withholding Question! 20 Y/O Daughter

It is against the law to inflate your number of deductions to avoid paying the witholding.<br /><br />You can get away with a reasonable number if your witholding comes within 90% or so of your actual tax liability, but you could get in trouble if your deductions on your W-4 are excessive, and your unpaid liability on your tax bill is high.