Two Incomes and Form W-4

Q. How do I complete the Form W-4 if my spouse is working or out of the country or retired?

A. Keep in mind that what I can discuss here is very general due to the nature of the question. The Form W-4 as mentioned before is the road map your payroll department uses to calculate your withholding correctly. A good rule of thumb is that if you claim an allowance on the W-4, your spouse cannot claim that same allowance. For instance, if you are married and put a “1″ in box A, then your spouse cannot claim “1″ in box C for you as well. If your total situation as defined by your accountant warrants claiming 6 allowances, then you and your spouse should probably split them in some fashion. If you both claim 6 allowances, chances are, you will be underwithheld and end up with a big tax bill the following April.

Page 2 of the W-4 gets into topics of two-wage earners which simply means both spouses are working or you as an individual have more than one job. Simply put, more than one job reduces the amount of allowances you can claim in total. By properly completing page 2 from the perspective of each job, you can get a good handle on how many allowances should be counted for each job. The General rule is the allowances should be claimed at the higher paying job. However, that is not always the case and is best defined by your tax adviser or accountant.

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