We often hear the question – how should my child fill out their W-4? And then we often hear the assumption – just take “0” and the max, right?
This is likely incorrect.
GENERALLY, when a child you claim as a dependent makes less than $12,950 in a year they are eligible for exempt status. This means FICA taxes are withheld (as required) but no additional federal or state income tax withholdings would be necessary.
Let’s say your dependent child completes the W-4 marking Single and no other allowances (often referred to as the ‘max’ or maximum withholdings). The employer may withhold $200 Federal and $50 State for the year. In this example, you may have to pay your GBE advisor a tax preparation fee of $100 or more in order for your child to receive their $200 Federal and $50 State refund.
As an alternative, marking the W-4 as EXEMPT would lead to $0 Federal and $0 State withholding. Thus, no tax preparation fee since no filing or refund is necessary.
Not every child’s situation is the same. But for the example noted above please write EXEMPT below Step 4c of your dependent child’s W-4 . A sample W-4 has been attached for your convenience.
This will grant them a larger net paycheck and less burdensome tax filing and preparation fees!