By Yeltsin Jean-Pierre

Part 1: Scenario
You are single and employed full-time at a department store. You have one child. Your gross income is $24,600.
You contributed $600 to an IRA account. You paid $1,675 in student loan interest payments. You made $940 in
charitable
donations.

Part 2: Claim Allowances

I choose to clam 2 allowances so my Federal Withholding is in the amount of $1,664.52
Number of
Allowances
0
1
2
3

Federal
Withholding
$2,774.46
$2,219.36
$1,664.52
$1,109.42

Personal Allowances Worksheet

A. Enter 1 for yourself if no one else can claim you as a dependent

A. 1

B. Enter 1 if

You are single and have only one job; or

You are married, have only one job, and your spouse does not work; or
Your wages from a second job or your spouses wages (or the total of both) are $1,500 or less.

B. 1

C. Enter 1 for your spouse. But, you may choose to enter -0- if you are
married and have either a working spouse or more than one job. (Entering -0-
C. 0
may help you avoid having too little tax withheld.)
D. Enter number of dependents (other than your spouse or yourself) you will claim
on your tax return.
D. 1
E. Add lines A through D and enter total here. This is the total number of
allowances you may claim.*

E. 2

Part 3: Calculate Taxable Income

AGI= 24,600 -600-1,675 =22325
Standard deduction of 5,700
Exemptions of 3,650+ 3,650= 7,300
Taxable Income = 22,325-5,700-7,300=9,325
Part 4:Calculate Tax Liability
Taxable Income = 9,325
If your taxable income is...
Not over $8,375
Over $8,375 but not over $34,000
Over $34,000 but not over $82,400
Over $82,400 but not over $171,850

your tax liability is...

10% of the taxable income
$837.50 plus 15% of the excess of
$8,375
$4,681.25 plus 25% of the excess over
$34,000
$16,781.25 plus 28% of the excess over
$82,400

837.50+ .15(9,325-8,375)
837.50+ .15(950)
837.50+ 142.5=980
part 5: Analysis
1: I claimed 2 allowances and the amount of federal withholding was $1664.52
2. If my tax liability was above the amount of federal withholding then I would owe money to the
IRS. If my tax liability was under the amount of federal withholding then I would receive a refund.
3. Federal withholding -Tax liability
$1664.52 - $980 = $684.52
4. I changed my number of allowances to3
new federal withholding is $1,109.42
new refund amount is $129.42
Changing my number of personal allowances decreased the amount of the refund I received
because the government withheld less money from me so now they owe me less.
5.My original amount of personal allowances were 2
My original refund was 684.52
I would reconsider how many personal allowances I put on my W-4 because the refund of $684.52
could have been used during the year for other things. I also could have put it in the bank so that I
could gain interest on it. I loaned money out for free instead of investing or other things.