November 21, 2013
The W-4 is used to subtract taxes from your paycheck. How do you identify how many allowances are right for you?
The W-4 is used to subtract taxes from your paycheck. How do you identify how many allowances are right for you?
Your allowances should reflect how many exemptions you have and how many deductions and credits you have. For instance, you could have three people in your family, but because you have multiple tax deductions/credits, you may have six allowances on your W-4.
If you received a large refund, consider increasing the number of allowances you claim so less tax is withheld. If you paid the IRS a large sum when you filed your return, decrease the number of allowances you claim. Some factors for claiming allowances: You’re single and have only one job, you have at least $1,900 of child- or dependent-care expenses and will claim a tax credit for these costs, you’ll claim child credits, etc.. It really depends on your situation!
You both covered the topic quite well. Well done! Let’s recap.
The W-4 is filled out by you, not your company HR department. Identify what the correct withholding is for your particular situation and then select the right amount of allowances that will work for you.
DO NOT let others tell you what is right for you (this includes the HR department). Only you know the right number. You can run some numbers by going here: http://www.irs.gov/Individuals/IRS-Withholding-Calculator.