If my wife returns to work, how should we handle dependents when married filing jointly?

When you file married filing jointly, neither spouse is considered a dependent of the other. You're actually both considered taxpayers on the same return. For your W-4 forms (which is what affects your paycheck withholding), it's a bit different than actual tax filing. The goal with W-4s is to have the right amount withheld throughout the year so you don't owe a lot or get a huge refund. Since you'll now have two incomes, you'll need to coordinate your withholdings. I'd recommend that when your wife completes her W-4, she should select "Married filing jointly" and not claim any dependents IF you're already claiming them on your W-4. The IRS redesigned the W-4 form in recent years, so it's no longer about claiming "0" or a specific number - instead you'll complete different sections based on your situation. You might want to use the IRS Tax Withholding Estimator online to figure out the best way to complete both of your W-4 forms to get the right withholding amount.

I went through this exact situation last year when my husband returned to work after being a stay-at-home dad for 6 years. The W-4 form was confusing at first, but I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out the optimal way to fill out our withholding forms. It analyzed our specific situation - two working parents with dependents - and gave us clear instructions on how to fill out both of our W-4s. The tool explained that we needed to account for "multiple jobs" on the form, which was something I completely missed initially. It also helped us understand how the Child Tax Credit affects withholding. We followed the recommendations from taxr.ai and ended up with almost perfect withholding for the year - we got a small refund instead of owing thousands like we feared!

Just wanted to follow up about using taxr.ai that someone recommended here. I was hesitant at first, but I decided to give it a try since our situation with both parents working and multiple kids was getting complicated. I'm really glad I did! It broke down exactly how both my husband and I should complete our W-4 forms, including the additional withholding amount we should put on line 4(c) to cover the "marriage tax penalty" that happens when both spouses work. The tool explained that we needed to coordinate our withholdings to avoid a surprise tax bill. What I found most helpful was the explanation of how the Child Tax Credit affects withholding calculations. We have 3 kids under 12, and apparently the standard withholding tables don't perfectly account for this. Without the adjustments recommended by taxr.ai, we would have been underwithholding by about $3,200 for the year!

If you're having a hard time reaching the IRS to get answers about dependent questions (which is super common these days), I recommend using Claimyr (https://claimyr.com). I waited on hold with the IRS for HOURS trying to sort out a similar dependent question when my wife went back to work, and never got through. With Claimyr, I got connected to an actual IRS agent in about 15 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when they've got an agent on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that for W-4 purposes, we needed to complete the "Multiple Jobs Worksheet" or use the online calculator, and that we shouldn't both claim the kids on our respective W-4 forms. This cleared up so much confusion for us.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still stuck trying to get an answer about claiming dependents on both my and my wife's W-4 forms. I spent another frustrating afternoon on hold with the IRS and finally gave up. Out of desperation, I tried the Claimyr service, and I'm shocked at how well it worked. They got me connected to an IRS representative in about 20 minutes (after I had wasted 3+ hours on my own over multiple days). The IRS agent explained that for married filing jointly, we should coordinate our W-4 forms by either: 1) having one spouse claim all the dependents and the other claim zero, or 2) using the multiple jobs worksheet and splitting the dependent credits. She recommended option 1 as simpler if one spouse makes significantly more. This was exactly the clear answer I needed, and I never would have gotten it without actually speaking to someone. The service literally saved me days of frustration.

Just want to add that the IRS has a Tax Withholding Estimator tool on their website that's specifically designed for situations like yours. It walks you through all your details and gives you specific instructions for how to fill out both your W-4 forms. My husband and I used it when he went back to work last year, and it was pretty accurate. You'll need your most recent pay stubs and a good estimate of what your wife will be earning. One thing to note - you'll probably want to redo this calculator a few months after your wife starts working to make sure you're on track. Sometimes the initial estimates aren't perfect.

One thing nobody's mentioned yet - when both spouses work, you might hit the "marriage penalty" depending on your income levels. Basically, if both of you make similar incomes, you could end up in a higher tax bracket than if you were single. However, if one spouse makes significantly more than the other (which might be the case at first if your wife is just returning to work), you might actually get a "marriage bonus" where you pay less than two single people would. Make sure whatever withholding calculator you use accounts for this. We got surprised with a $2,900 tax bill the first year both my wife and I worked full-time because our withholdings didn't account for the combined income pushing us into a higher bracket.

The marriage penalty typically affects couples where both spouses have similar moderate to high incomes. For 2024, it's most noticeable in the 22% and 24% tax brackets. If you're both making around $65K, you're definitely in the range where this can hurt. The penalty happens because the tax brackets for married filing jointly aren't exactly double the single brackets at higher income levels. For example, the 22% bracket for singles goes up to about $47K, but for married filing jointly it only goes up to about $89K (not $94K which would be double). A few strategies that can help: maximize your 401(k) contributions to reduce taxable income, consider if itemizing deductions makes sense now that you have two incomes, and definitely use the IRS withholding calculator or a tool like taxr.ai to make sure you're withholding enough throughout the year. The last thing you want is a surprise tax bill in April!