Ideally, you should adjust the number of allowances claimed on your W-4 so you avoid either having to pay additional taxes or receiving a large refund. Preventing a large tax bill keeps things affordable, while receiving only a small refund avoids loaning Uncle Sam your cash.Continue Reading
The first thing to consider when deciding how many allowances to claim on your W-4 is how much you paid in taxes the previous year. The second thing to think about is whether you had any major life changes since the previous tax year, such as changing jobs, entering or leaving the workforce, adding or losing a dependent, getting married or getting divorced. If you owed little or no tax and did not receive a large refund the previous year and your circumstances haven't changed, keep the allowances the same. If, however, you had major life changes, re-estimate your allowances using the worksheet section of the W-4.
Claiming allowances on a W-4 gives taxpayers a rough estimate of how much money to ask the government to withhold from their income. More allowances means the government withholds less money, while fewer allowances means it takes out more. There is no legal requirement that allowances match the number of dependents on the tax return actually filed, so taxpayers can increase or decrease the amount of withholding by raising or lowering the number of allowances claimed.Learn more about Income Tax