Before you file your tax returns or receive your tax returns, there is another form that has to be filled out. That form is the W-4.
A lot of people just go through the motions when filling out this form, but there are some strategic aspects— do’s and don’ts—of filling it out that will either help or harm you when it comes to filing for taxes.
Know whether or not your parents are going to claim you as a dependent on their tax return. According to irs.gov, if your parents are going to list you as a dependent on their tax return and claim a personal exemption for you, then you can’t claim a personal exemption on your own personal tax return.
Don’t put exempt on your form.
A lot of students whose annual incomes are less than $6300 are tempted to put exempt when filling out their W-4’s. But Lori Hoekstra, Assistant Controller at Miller Business Center, advised against this. “If you put exempt on your W-4, then you will have to fill out a new one every year,” she said. Instead, she suggests putting either a 1 or a 0.
Know when to put 1 and when to put 0. Dr. Mark Williams of the Business Department said that, for Illinois residents, if your parents claim you as a dependent on their tax return and you make more than $2,150, for state purposes, put a 0.
“If you make more than 2,150 bucks and you put something other than zero on your W-4, you’re going to owe money to the government when you file your tax return,” Williams said. Putting a 1 or a 0 also depends on your own personal preferences. Williams said, “The rule of thumb is this: if you want more tax withheld, then put zero. If you want less tax withheld, then put one. If you like getting a bigger refund because that’s the way you save money, then have a lot withheld from your pay so when you file your return you can get a refund.”
Know when you are eligible for exemption. According to irs.gov, whether or not you are eligible for tax exemption depends on four things: the amounts of your earned and unearned income, whether or not you are claimed as a dependent on another person’s tax return, your filing status and your age.
Know whether you are considered an employee or an independent contractor by your employer. Dr. Williams offered this last piece of advice when it comes to filling out the W-4. According to him, the difference between the two is that employers who treat you as an independent contractor won’t withhold any taxes but will give a 1099 at the end of the year, which would make you responsible for your own taxes.
“Under that scenario, what that employer is basically arguing is that you are in business for yourself and you’re not an employee of that organization,” Williams said. “So, make sure you look at your paycheck stub after you start getting paid to see whether you have taxes withheld.”
Following this advice before tax season comes will help you to get the most out of your return.
–Kelli Poole, staff writer