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Aug 16, 2018

While it is one of the most common tax forms used by employers, there is often a lot of confusion when it comes to Form W-4.  

So, why is it important? 

The W-4 is a tax form used by your employer to withhold the proper amount of income tax.  The number of allowances you claim on your W-4 decides the amount of tax your employer withholds from every paycheck. Knowing the right amount of allowances to claim is determined by your filing status, the number of jobs you maintain, and your specific scenario concerning dependents. If your allowances are inaccurate, you may owe the government more money than expected when you file your tax return.

Let’s run through a few scenarios to give you a better idea of how many allowances to claim on your W-4.

Student working one job 

If you are a high school or college student working a job, then claiming zero allowances is your best bet. This is because your parents claim you on their W-4. If you claim zero allowances, expect your employer to withhold the maximum amount of taxes on your paycheck. While it may be nice to receive a tax refund, this is essentially an interest-free loan to the government. 

If you are a student working one job but not claimed as a dependent on your parent’s W-4, then pay particular attention to the following scenario. 

Single with one job 

For this scenario, claiming one or two allowances are options. Often, employees that are single with one job claim just one allowance and expect a tax refund.

Although, by claiming two allowances you may get closer to your tax liability. But be mindful as you might withhold too much and end up having to owe the government. You may also have to pay penalties.

Remember, if you have more than two jobs you have the choice on how you want to report your allowances. You can declare one allowance at each job, or both at one job. In this case, you would claim zero allowances at your other position.

Married with a child 

If you are married with a child, you might want to consider claiming three allowances. One for you and your spouse and one for your child. If you have more than one child, add another allowance.

Are you looking for more instructions on Form W-4? The IRS provides W-4 instructions here 

Another critical aspect to consider when it comes to your W-4 is keeping it up-to-date to reflect your scenario. If you recently had children or were married, it’s best you update your W-4 to ensure accurate withholding. 

Need help filling out your W-4? Try our W-4 Calculator!

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