The W-4 form determines how much tax is withheld from your wages based on how many allowances you claim
Form W-4 [Employee’s Withholding Allowance Certificate] determines how much federal, state, local, Social Security, and Medicare tax is withheld from your paychecks. When beginning a new job, you must fill out this form and give it to your employer, even if you are exempt from withholding.
On the W-4 you can claim a certain number of allowances depending on your life situation. It’s these allowances that determine your withholding (and size of refund or tax due when filing your taxes).
If you claim 0 allowances, the maximum amount of taxes will be withheld. For every additional allowance you claim, a little less tax will be withheld from your paycheck.
The Number You Should Claim
The details to your specific situation (such as your filing status, number of children, etc) will determine how you should fill out your W-4.
If your parents claim you:
If you’re being claimed as a dependent on someone’s tax return, you’ll want to claim 0 allowances. This is because your parents are claiming you as an exemption, rather than you claiming yourself.
If You’re Single:
- & Working One Job: If you definitely want a refund, claim 0. However, you will have more tax withheld from each paycheck, meaning smaller paychecks. Choosing to claim 1 allowance will guarantee you a refund at the end of the tax year, without having the maximum tax withheld from your pay. Claiming two allowances will most likely get you the closest to your tax obligations, but when everything is said and done you may end up owing the IRS a modest sum.
- & Working Two Jobs: If you work two jobs and are filing as single, ideally you would claim one allowance at each job. If you already claimed 0 at one job, claim 2 allowances at the other job. If you want a larger refund when tax season rolls around, claim one allowance at one job and zero at the other.
If You’re Married:
- Without Kids: You should claim 2 allowances if your spouse does not work. If your spouse does work, each of you should claim 1 allowance.
- With Kids: If you are married with a kid, you and your spouse combined should generally claim 3 allowances. For each additional child, add an allowance. So, if you’re married with two kids, as a couple, you would claim a total of 4 allowances, meaning each of you would ideally claim 2 allowances on your W-4s.
If You’re Head of Household
- You can claim additional allowances if your filing status is head of household. In other words, if you’re single with two kids and eligible for head of household filing status, you would claim four allowances.
If You’re Still Confused
Allowances can be difficult to determine. Everyone should complete the Personal Allowances Worksheet on the first page of the W-4. Those who plan to itemize deductions should complete the Deductions and Adjustments Worksheet on page 2 and those with two jobs or a spouse who works should complete the Two-Earners/Multiple Jobs Worksheet on page 2 also.
If you still need help, the IRS Withholding Calculator tool will help you determine your allowances.
When you file your return, make sure your withholding more or less lines up with your tax obligations. If you have a big tax bill after filing, you’ll want to lower your number of allowances on your W-4.
You Can Adjust Your W-4 Allowances
Remember to adjust your W-4 if there are major changes in your life. If you get married or divorced, or gain or lose a dependent, you will need to change the number of allowances you claim. Likewise, if you become or cease to be someone else’s dependent you will likely have to change your withholding.
Withholding is something everyone needs to pay attention to, whether you’re looking ahead to the upcoming tax season or filing back tax returns online.
If you’re not happy with your refund amount after filing your taxes, think about changing the number of allowances on your W-4.
Photo via Chris Potter on Flickr.