Withholding allowances are based on a worker's filing status, the employment status of both he and his spouse, the number of dependents he claims and whether he claims certain tax credits. For example, a single filer with no dependents and one job claims two on his W-4, one for himself and one for being single with one job, according to the IRS.
A worker also has the option to claim an exemption from withholding if he does not have any tax liability and should not have any taxes withheld from his paycheck. Exemption only applies to federal income taxes, not Social Security or Medicare taxes, explains the IRS. If a worker does not fill out a W-4 form, his employer must withhold the maximum amount of taxes for his income level from his paycheck.
According to TurboTax, it is a good idea for a worker to update his W-4 each time he has any life changes to prevent overpaying or underpaying on his taxes. Life changes that warrant a change in allowances on a W-4 include a worker or a worker's spouse changing jobs or getting a second job, getting married or divorced or having a baby or adopting a child. W-4 withholding information is changed by filling out another W-4 form.