Is It Better to File One Dependent Rather Than Zero on a W-2?

by Devra Gartenstein
When you file your federal tax return, you reconcile the sums you have paid with the amount you actually owe.

Figuring income tax withholding is an inexact science. The number of withholding allowances you claim on your W-4 form helps your employer determine how much income tax to take out of each paycheck. However, the actual amount of tax you will owe at the end of the year depends on additional variables besides the earnings reported on your W-2 form for a particular job. Claiming a higher number of dependents decreases the amount that is taken out of any particular paycheck, but could increase the amount you owe when you file your annual return.

Tax Rate Variables

The amount of income tax you will owe at the end of the year depends on the number of dependents you claim on your tax return, but other variables come into play as well. The higher your overall income, the higher your overall tax rate, so if you hold multiple jobs, you may be taxed at a higher rate than if you hold only one. Claiming fewer dependents on your W-4 will increase your tax withholding and may provide you with a more accurate withholding if you hold multiple jobs, even if you actually support more dependents than you claim.

Taxes Reported on W-2s

Your W2 is a document your employer provides at the beginning of each year showing your earnings and tax withholdings from the previous year. The tax withholding on your W-2 reflects the number of dependents you claimed when you filled out your W-4. The amount of tax withholding on your W-2 does not reflect the amount of tax you will ultimately owe when you complete your federal tax return. Your total annual taxes depend on your total earnings at all of your jobs, the number of dependents you are entitled to claim as deductions and other deductions you may take, such as mortgage interest.

Consequences of Overpaying

If you claim too few dependents on your W-4, and your employer withholds more income tax than you actually owe at the end of the year, you have the option of receiving a refund or using your overpayment to cover other tax liabilities such as underpayment from a previous year. There are no penalties for overpaying. However, you may not have your money available when you need it because the government is holding it.

Consequences of Underpaying

If you claim a higher number of dependents and your employer withholds a smaller sum than you actually owe, you must pay the balance when you file your federal tax return. You may also incur penalties for underpayment. If you don't have the money you owe, contact the IRS by phone and set up a payment plan. This arrangement will involve paying principal and interest on your liability according to a schedule that you negotiate with an IRS agent.

About the Author

Devra Gartenstein has owned and run a variety of food businesses for more than 20 years. She has published two cookbooks: "The Accidental Vegan" and "Local Bounty." Gartenstein holds Master of Arts degrees in philosophy and English literature.

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