How it Works

• Claiming more allowances on your W-4 form results in less of your income being taxed. A withholding allowance is your tax deductions divided by the personal exemption rate. To calculate the correct number of allowances, you will need to complete the worksheet included on the form you file.
  
  

Claiming Allowances

• When completing a W-4 form, you will be asked to provide your name, address and Social Security number. You are also asked about your marital status. You are allowed one allowance for yourself, one for your spouse and one for your child or other dependents. If you file as head of household, you can also receive an allowance. Child or dependent-care expenses of more than $1,500 a year are eligible for one allowance. If you have more than one job, you will need to claim zero allowances on your second job.
  
  

Exempt Status

• You are exempt from income tax withholding if your annual income is less than $800. If you mark the W-4 form exempt, no taxes will be withheld and you will keep all your income. According to the Internal Revenue Service (IRS), you are only able to claim exemption from withholding if for the prior tax year you were eligible for a refund of all federal income tax withheld because you had no tax liability and expect the same for the current year.
  
  

Considerations

• You are not allowed to deliberately enter a misleading number on your W-4 form to have less taxes withheld from your pay. You can face significant penalties and fees if the correct amount is not withheld from your paycheck during the year. To ensure you complete the form accurately, you can use the IRS Withholding Calculator to calculate exact withholding allowances.