New Exemption

The good news is out. Marny and Jeff are expecting their first child in July. A brand new exemption!

This is one of those life events that can impact income tax returns. This exemption born in July will count as an exemption all year long.

My nephew Buddy was born 12/31. My sister and her husband took him as a full year exemption back on their 1986 tax returns (that's right, he celebrated his 21st on New Years Eve).

Exemptions are what you claim on your W4 which you file with your employer. The employer withholds income tax from your paychecks based on the exemption number you provide.

This number affects your paycheck. There is no need to claim all available exemptions. If you have unearned income during the year, you can claim less or zero exemptions with your W4 and have more income tax withheld to cover what you will owe.

In fact if you have income outside of your paychecks (dividends, interest, etc.), you can have your employer withhold extra specific amounts of income taxes on your W4. The other way to pay taxes - remember, Uncle Sam wants to be paid as you go - is with quarterly payments.

These are due 4/15, 6/15, 9/15, and 1/15 to spread the collections over the year. The January payment which is due today is actually meant to cover income from the last quarter of last year.

'til later