Verified answer

No. It's not illegal to claim excess allowances. But as Cathi says, if you end up owing too much money, you could be penalized. Still, it's perfectly legal.

If you claim more allowances than allowed on a w-4 -- some states will fine you $500 - $1,000 for making false claims on a w-4. You can be fined $500 for making false claims on a fed w-4 too.

quoting from both Pub 17 & the following link

"An employee may be subject to a $500 penalty if he or she submits, with no reasonable basis, a Form W-4 that results in less tax being withheld than is required"

You may also get a lock-in letter for zero allowances & your employer will w/h at maximum rate.

http://www.irs.gov/taxtopics/tc753.html

Did you bother to read the line above your signature on a w-4? Let me quote..

"Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.

Employee’s signature"

You said you always get 1k back. Are you a dependent on your parents tax return? If so, you can legally claim Exempt if you reasonably expect to earn 6,200 or Less in 2014.

If not a dependent & file Single with no dependents, the first 10,150 is Exempt from federal income tax.

Whether you are a dependent or not, the first 9,075 in taxable income is taxed at 10%. If you are a dependent & you earn 7k ---- 7,000 - 6,200 = 800 x 10% = 80 tax

If you owe over 1k to fed when you file your tax return, you will owe a penalty. You may escape penalty the first year if you did not owe taxes last year; but the irs will look at your w-2 & see there was no w/h. Your employer will get a lock- in letter & they will w/h based on zero allowances.

You said you got 1k back last year which is quite a large refund for a dependent.. Did you qualify to claim Exempt last year & chose not too? If you can reasonable expect not to have a tax liability because you earn 6,200 (10,150) or entitled to credits, claim Exempt.

http://www.irs.gov/pub/irs-pdf/fw4.pdf

You'll prob be ok this year -- change your w-4 if need be & don't do this again. Also, don't take tax advice from ill-informed friends..

Good Luck

What surprises me is WHY your employer would accept a w-4 from someone your age claiming 9 allowances. He should have suspected fraud. The IRS will be questioning your employer also & possibly fined by fed and or state..

Yes it is and you get to playing games with your W-4 form and then the IRS does get involved and then you could end up with a LOCK IN letter for that purpose and time in your life.

Understanding your 2802C Letter

You received this letter because we determined that your withholding doesn’t comply with our guidelines. If you do a correction now, you will avoid receiving a lock-in letter in the future that tells your employer to increase your withholding rate. You can disregard this letter if you already corrected your W-4.

http://www.irs.gov/Individuals/Understanding-your-...

What happens if the IRS determines that I do not have adequate withholding?

We can tell your employer to withhold federal income tax at an increased rate. We do this by issuing a “lock-in letter.” At that point, your employer must disregard any Form W-4 that decreases the amount of your withholding. You’ll receive a copy of the lock-in letter, and we’ll give you some time before the lock-in rate is effective to submit a new Form W-4. If you write to the IRS, include a statement that explains why you believe you’re entitled to a different withholding rate or number of withholding allowances. Once we issue a lock-in letter, you won’t be able to decrease your withholding unless we approve it.

Hope that you find the above enclosed information useful. 07/29/2014

You claim allowances not dependents. Do the worksheet. IF you owe 1k or more at tax time you are penalized and the IRS can send a letter to your employer forcing you to be at single/0. It usually takes employers one or two pay cycles to change it both times.