Social Security and Medicare Taxes

• Regardless of the number of dependents you claim on your W-4, your employer will still withhold Social Security and Medicare taxes from your gross earnings. In 2011, 4.2 percent of your salary is withheld up to $106,800 for Social Security. Your employer will also withhold an additional 1.45 percent for Medicare, with no cap on the wages for which this tax is taken.
  
  

Federal Income Tax

• The amount of federal income taxes withheld from your paycheck decreases as you claim more deduction allowances. When you complete your W-4 worksheet, you will find that you add allowances for different purposes. Not only do you count yourself, your spouse and your dependents, but you will also add allowances based on your projected child care expenses, if you file as Head of Household or if your income falls within a certain range. Each year, the IRS publishes Schedule E, which provides withholding information for employers. In that schedule are tables that tell the employer how much is to be withheld based on the amount you are paid and the frequency in which you are paid. For example, a married person making $1,000 per week, paid weekly, would have $90 withheld for federal income taxes claiming two allowances, but only $14 if he claims 10 allowances.
  
  

Earned Income Credit

• If you earned less than $43,352 in 2010, or $48,362 if you were married and filed a joint tax return, you were eligible for the EIC tax credit. Your employer may have added part of this to your paycheck as an advance payment. The law permitting advance payments of the EIC expired December 31, 2010. While you can still claim the EIC and receive the credit when you file your 2011 income tax return, the only way to receive some of these funds in advance is to adjust your withholding with your employer.
  
  

State Income Taxes

• If you live in a state that imposes an income tax, the amount withheld is usually reduced by the number of dependents you claim. As a result, your state income tax withholding may be lower as well. Since state income taxes vary by state, you will need to as your human resources representative how much your paycheck is affected by claiming 10 allowances on your withholding form.