W-4 Worksheet

YOU MAY BE ENTITLED TO MORE TAKE HOME PAY ON YOUR PAYCHECK!

According to the IRS, you may be able to change your tax withholding from your current employer and give yourself more take home pay if any of the following are true:

You obtained a refund last year and this year your income and deductions will remain about the same.
Your income will remain about the same as last year but your deductions (from your home based business), credits or other adjustments will significantly increase.
You will have a loss or losses from income that is not typically subject to withholding, such as from a home based business, rental properties or investments (and this loss was not part of your 2005 tax return).

COMMON QUESTIONS ABOUT TAX WITHHOLDINGS

Q:           How can I increase my take-home pay?

A:            Short of having your employer give you a raise, you will need to increase the number of exemptions on your Form W-4. You must be able to answer “YES” to one of the three situations above before you will typically qualify to change your Form W-4. For every exemption you claim on your W-4, your paycheck will increase approximately $225 per month.

Q:            What happens if I change my Form W-4?

A:            A change in your Form W-4 will not affect the amount of tax that you are legally liable to pay next tax season. Instead, this change will simply affect how much in tax is withheld from your current paycheck. Owning and operating a home based business allows you to deduct all normal & reasonable business related expenses thus significantly lowering your taxable income. There is no reason to give the Government an interest-free loan when that money really belongs to you and your family. Of course, the opposite is true in that you do not want to owe a lot of money next April 15. There are situations in which it would make sense to have more money withheld from your current paycheck, such as if your new, home-based business is very profitable and you don’t want to make Estimated Tax payments on a quarterly basis to the IRS.   As your business becomes more profitable, you can adjust your W-4 accordingly to avoid paying quarterly estimated taxes.

Q:            How many exemptions should I claim on my Form W-4?

A:            The answer to this question depends upon your unique financial and personal situation. To answer this question, you should begin by completing the Tax Strategies and Solution’s W-4 Calculator. If this shows that you qualify for a change in your W-4, you should contact a qualified tax consultant to make sure that you satisfy all of the complex rules associated with this area of the tax laws. WE DO NOT RECOMMEND CHANGING YOUR W-4 BY MORE THAN 2 EXEMPTIONS.

Q:            What do I do if my income significantly increases?

A:            If you have previously changed your W-4 to have fewer taxes withheld, you should redo the W-4 calculator and see how many exemptions you should now be claiming. If you don’t want to have more taxes withheld from your paycheck you can make Estimated Quarterly Tax payments based on your increase of income from your home based business.

Do not change your exemptions on your form W-4 unless you are certain that you qualify. IT IS STRONGLY RECOMMENDED THAT YOU CONTACT A QUALIFIED TAX CONSULTANT BEFORE MAKING ANY CHANGES.    Of course, if you qualify to make a change, this will ensure that you do not provide an interest-free loan to the Government and will, in effect, increase your take-home pay so that you and your family will immediately benefit. For further information, please consult with IRS Publication 919 or speak with a qualified tax consultant of your own choosing.

TAX STRATEGIES AND SOLUTIONS, INC.

W-4 EXEMPTION CALCULATOR

Your business income will increase as the year goes on. In calculating your W-4 exemptions for the next quarter, estimate your business income for the next 3 months and multiply it by 4. By doing this and completing this form, you will get an accurate assessment of how many exemptions to claim on your W-4 for right now. You will need to re-assess your personal exemptions once per quarter to accurately reflect the increase in your income and business related expenses.

1.       Annual estimate of gross income for business. $_________

                (3 months income x 4 = annual estimate)

2.       Less ordinary and necessary ANNUAL business expenses:

A. Advertising/Marketing $________

(gifts, flyers, brochures, meetings, etc...)

B. Business Travel Expenses $________

(airfare, hotel, rental car, taxi, etc...)

C. Business Meals (1/2 of estimate) $________

(breakfast, lunch, dinner, drinks, etc...)

D. Wages Paid to Employees

($4,400 per child, spouse/significant other) $________

E. Business Miles $________

Multiply total business miles _________ by .445

(any miles driven for any business purpose)

J. Miscellaneous Auto Expense $________

(parking, registration, tolls,. etc...)

F. Phone $________

(long distance, cell phone, fax line, pager, etc...)

G. Business Legal/Tax/Professional $________

(Gold/Silver Tax Service, Deluxe Tax Pack, Tax preparation)

H. Entertainment $________

(golf, movies, theater, sporting events, concerts, skiing, theme parks, athletic clubs,

hunting/fishing, business parties, etc...)

I. Office equipment $________

(computers, printers, furniture, software, phones, paper, organizational stuff, etc...)

K. Medical Expenses $________

(co-pays, prescriptions, premiums, dental, orthodontics, glasses, optometrist, etc...)

N. Other Business Expenses

______________________________ $________

______________________________ $________

______________________________ $________

TOTAL LINE 2 - Less ordinary and necessary business expenses TOTAL: $__________

3.       Subtract Line 2 from Line 1- Net Business Income (Loss) $__________

If Line 3 is a net income, continue to Line 4. If Line 3 is a net loss,

enter the amount from Line 3 on Line 10 below.

4. Enter total square feet of home office $________

5. Enter total square feet of entire home $________

6. Divide Line 4 by Line 5 $________

7. Household Expenses (from below) $________

Utilities        _________

Insurance     _________

Rent            _________

Maintenance _________

8. Multiply Line 7 by the % in Line 6 $___________

9. Subtract Line 8 from Line 3 $___________

10. Net Business Income (Loss) $___________

11. Divide the number on Line 10 by $2,900 (drop any fraction)

Line 10 $_______ / $2,900 = _____ # of new exemptions added to your W-4

If the number on Line 10 is a loss, you may increase the number of exemptions on your Form W-4 by the number on Line 11. This will result in having less money withheld from your paycheck.

For every exemption that you claim on your W-4, your take-home pay will increase approximately $225 per month. If your income increases throughout the year, it will be necessary to either re-calculate and adjust your W-4 or pay quarterly estimated taxes.

If the number on Line 10 is a gain, you may need to decrease the number of exemptions on your W-4 by the number on Line 11. This will result in having more money withheld from your paycheck.

TO MAKE ANY CHANGES TO YOUR FORM W-4, WE STRONGLY RECOMMEND AND ADVISE THAT YOU SEEK COUNSEL FROM A QUALIFIED TAX PROFESSIONAL, AS YOU DO NOT WANT TO END UP OWING ANY MONEY TO THE IRS COME APRIL 15.

You can obtain a new W-4 by going to the IRS website www.irs.gov/pub/irs-pdf/fw4.pdf