If the IRS refunded you last year for all of the federal income tax that was withheld, and if you expect that to happen again this year, you can claim exemption from withholding. You cannot claim exemption from withholding if either one of the following is true:. Keep in mind that this exemption only applies to federal income tax. You can claim deductions and extra withholding as you so please. You may want to claim different amounts to change the size of your paychecks.
This is a personal choice that helps you plan your budget throughout the year. At the same time, you can submit a new W-4 at any time during the year. So if you decide that you want larger or smaller paychecks, you can submit a new W-4 to your employer with a different number of deductions or withholdings. Tax allowances were an important part of helping people reduce or increase the size of their paychecks.
Toggle navigation. Need help now? Get started online or call us today. Get Started. Call Us Toll Free How many Tax Allowances should you Claim? Watch the video: Whenever you get paid, a certain amount of income tax is automatically withdrawn or withheld from your paycheck and turned over to the IRS. A married couple can combine their incomes and file a single joint account.
In the past, employees could claim allowances on their W-4 to lower the amount of federal income tax withheld from their wages. The more withholding allowances an employee claimed, the less their employer would withhold from their paychecks.
However, the Tax Cuts and Jobs Act overhauled a lot of tax rules, including doing away with personal exemptions. That prompted the IRS to change the W-4 form. The new W-4, introduced in , still asks for basic personal information but no longer asks for a number of allowances. Now, employees who want to lower their tax withholding must claim dependents or use a deductions worksheet.
Form W-4 is available on the IRS website. Here's how to complete the steps that apply to your situation. Enter your name, address, Social Security number and tax-filing status. If you have more than one job, or you file jointly and your spouse works, follow the instructions below to get more accurate withholding.
You typically have to have a W-4 on file for each job. Leave those steps blank on the W-4s for the other jobs. The trick: Both spouses need to do that on each of their W-4s. On line 4 c , you can instruct your employer to withhold an extra amount of tax from your paycheck.
Instead of having the tax come directly out of your paycheck, send estimated quarterly tax payments to the IRS yourself instead. See the rules about the child tax credit and for when you can claim a tax dependent. If you want extra tax withheld or expect to claim deductions other than the standard deduction when you do your taxes, you can note that. Once completed, give the form to your employer's human resources or payroll team. Consider using Form W-4 to reduce your withholding.
And here are some steps you might take toward a specific outcome:. If you want more taxes taken out of your paychecks, perhaps leading to a tax refund when you file your annual return, here's how you might adjust your W Add an extra amount to withhold on line 4 c. If you want less in taxes taken out of your paychecks, perhaps leading to having to pay a tax bill when you file your annual return, here's how you might adjust your W Reduce the number on line 4 a or 4 c.
That's it — you're done! Your employer will compute your tax withholding based on the standard deduction and tax rates for your filing status, with no other adjustments. If your taxes are more complicated, it will probably take you more time to complete a W-4 form.
That's because you'll have to dig up information about your spouse's income, your dependents, tax credits, and the deductions you expect to claim. When new hires are handed a W-4, "they may need to call their accountant to ask questions, or have their spouse look up information from their last tax return," says Pete Isberg, Vice President of Government Affairs for payroll processor ADP.
They'll need to know what their total deductions were last year, if they still qualify for the child tax credit, how much non-wage income they reported on their last return, and similar tax-related things.
You'll probably have to take the form home and fill it out there, instead of turning it in right away on your first day of work. Having multiple jobs or a spouse who works can affect the amount of tax withheld from your wages. Tax rates increase as income rises, and only one standard deduction can be claimed on each tax return, regardless of the number of jobs. As a result, if you have more than one job at a time or file a joint return with a working spouse, more money should usually be withheld from the combined pay for all the jobs than would be withheld if each job was considered by itself.
Therefore, adjustments to your withholding must be made to avoid owing additional tax, and maybe penalties, when you file your tax return. Fortunately, the W-4 form has a section where you can provide information about additional jobs and working spouses so that your withholding can be adjusted accordingly.
Step 2 of the form actually lists three different options you can choose from to make the necessary adjustments. Also note that the IRS recommends completing a W-4 for all your jobs to get the most accurate withholding.
By accurate, they mean having total withholding as close to your expected tax liability as possible. The W-4 form makes it easy to adjust your withholding to account for certain tax credits and deductions.
There are clear lines on the W-4 form to add these amounts — you can't miss them. Including credits and deductions on the form will decrease the amount of tax withheld, which in turn increases the amount of your paycheck and reduces any refund you may get when you file your tax return. Workers can factor in the child tax credit and the credit for other dependents in Step 3 of the form.
You can also include estimates for other tax credits in Step 3, such as education tax credits or the foreign tax credit. For deductions, it's important to note that you should only enter deductions other than the basic standard deduction on Line 4 b.
So, you can include itemized deductions on this line. If you take the standard deduction, you can also include other deductions, such as those for student loan interest and IRAs. However, do not include the standard deduction amount itself. It could be "a source of error if folks just put in their full amount," warns Isberg. If you have multiple jobs or a working spouse, complete Step 3 and Line 4 b on only one W-4 form.
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