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You’ve probably started a new job recently. Congrats!
You’ve probably been given tons of paperwork to read and fill out – like a W4, right?
Maybe you know that the W4 form has something to do with your taxes, and maybe you even know that depending on how you fill it out, it can change the amount you receive each paycheck.
And you probably gave your W4 read and thought, “Should I claim 1 or 0”?
Choosing 1 or 0 won’t make that much of a difference, but you do want to be filling your W4 out accurately (to make sure that you’re paying the right amount in taxes).
If you want to keep reading, I’ll be giving you some information about what a W4 is, what allowances are, and help guide you on choosing between 1 or 0. You’ll be an expert on W4’s by the end of this. 😀
What is A W4 form?
The W4 (W-4) form (also called the Employee’s Withholding Allowance Certificate) is a form that your employer uses to make sure that they are withholding the correct amount of taxes from your paycheck.
You’re probably wondering why your employer (or anyone would want to do this at all). Withholding exists so you can basically pay the taxes you owe the government with every paycheck, so you don’t end up with a huge tax bill at the end of the year. 👍
When you fill out the W4 form, it helps determine how much needs to be withheld from your paycheck according to how many allowances you “claim” (write down). Usually the more allowances you claim the less money will be withheld, meaning you will get more money each paycheck.
But you need to be careful, if you claim too many allowances, you might end up owing taxes at the end of the year 😱 – which is why it’s important to fill out your W4 correctly the first time.
Here’s what a W4 form looks like:
If you’d like to see the full form, just visit this page on the IRS website.
What are tax allowances?
Now that you understand what a W4 is and why it’s important, let’s talk tax allowances.
Tax allowances can be called allowances, withholding allowances, or sometimes “exemption”.
A tax allowance (or exemption, or withholding allowance or whatever you’d like to call it) is something that tells the employer how much of your income is exempt from being taxed (that’s why allowances are sometimes called exemptions).
What happens if I claim too many allowances?
If you claim too many allowances, you most likely won’t get a tax return, and you may owe taxes.
You might also have to pay a $500 penalty. Here’s what the IRS says about it, “An employee may be subject to a $500 penalty if he or she submits, with no reasonable basis, a Form W-4 that results in less tax being withheld than is required.” (Topic No. 753 Form W-4 – Employee’s Withholding Allowance Certificate)
What happens if I don’t claim enough allowances?
If you don’t claim enough allowances, you will probably get a tax refund. Getting a tax refund is great, but it most likely won’t cover all the money you overpaid throughout the year.
Let me say it again for the people in the back:
Refunds are cool and all, but they sometimes don’t cover all the money that you overpaid during the year.
So make sure you fill out your W4 form correctly. 😀
How many allowances can I claim?
Technically you could claim as many allowances as you want (See this Reddit user who wanted to claim 99 dependents), but that isn’t really the question, is it?
How many allowances should you claim, is what you’d like to know, right? I got you:
|How Many Allowances Should I Claim?|
|Your Tax Situation:||Allowances You Can Claim:|
|Someone can claim you as a dependent||0 (possibly 1 in some situations)|
|Single, one job, no dependents||1 (possibly 2 in some situations)|
|Married Filing Jointly, no dependents||1-2|
|Married Filing Separately, and you have only one job||1|
|Married Filing Jointly, you have one job and your spouse doesn’t currently work||1|
|Head of Household, one dependent||3|
|Married Couple, one dependent||3|
|Married Couple, two dependents||4|
|Married Couple, three dependents||5|
|You see the pattern, right? One allowance for every dependent.|
If you want the official answer for your personal situation, take a look at the W4 Form on the IRS website and use it to find how many allowances you should claim. You can also ask a tax professional.
What if I have more than one job?
If you have more than one job, you’ll still use the same W4 form to find how many allowances you need, but the allowances are in TOTAL.
For example, if you use the W4 form, and find that you can claim 2 allowances, you can only claim 2 allowances TOTAL between your W4’s for your workplaces, so for workplace 1, you could claim 2 allowances, but for your second job you wouldn’t claim any.
How do allowances work if I’m married?
It’s kind of like when you have multiple jobs, the allowances are TOTAL for the married couple.
If you as a couple can claim 4 allowances, these allowances need to be split between the jobs (however they see fit).
Here’s how claiming different allowances will affect you:
If you decide to claim 0 allowances, then the maximum amount of taxes will be withheld from your paycheck. That could be a huge chunk of money, but you could end up with a refund at the end of the year.
Who should claim 0 allowances?
There are (for the most part) two situations where claiming 0 allowances would be appropriate:
- If someone else claims you as a dependent – if you’re a college student or a teenager who works, you could claim 0 allowances on your tax return.
- You want someone to save for you – There are some people that decide to claim 0 allowances so they can have a large amount given to them in the form of a tax return – this money gets saved or used for special things like a vacation. People basically use this for a different type of “savings” account.
- I don’t recommend this at all. If you do your allowances correctly, you can save the money you get each paycheck and earn interest on it, or invest it and get compound interest.
Also, the money you get for your tax return might not be all the money you overpaid before (you might be losing money).
Claiming 1 Allowance:
If you claim 1 allowance, less of your paycheck will be withheld from you – you’ll get more money each paycheck. But since it’s only one allowance, you still might end up getting a tax refund.
Who should claim 1 allowance?
If you are single, have no dependents, and you only have one job, then you should claim 1 allowance.
Claiming 2 Allowances:
By claiming two allowances there will be a bit less withheld from your paycheck.
Who should claim 2 allowances?
Here’s who should be claiming two allowances:
- Single people with only one job – If you’re in this situation, claiming two allowances might help you get closer to the amount that should be withheld from your paycheck. If you’re paying the right amount in taxes, then you won’t be getting a refund during tax season, because you didn’t overpay in taxes during the year. Butttt… If you claim 2 allowances as a single person, and that’s too many, you might end up owing taxes at the end of the year.
- Single people with more than one job – If you happen to have more than one job, you might be in a situation where you can claim 2 allowances. What you can do is split your allowances between your jobs (Job 1 gets one allowance, Job 2 gets the other allowance), or you can just claim 2 allowances at one job, and 0 at your other job.
- Married filing jointly – If a married couple is going to file a joint tax return and they both have jobs, they only need to complete one set of W4’s. They can also split their allowances between the W4’s (wife’s job gets 1 allowance, husband’s job gets 1 allowance) or combine them on one W4 (wife’s job gets 2 allowances, husband’s job gets 1 allowance).
- Married filing separately – If a couple is married but files (or plans to) separate returns, they will fill out separate W4’s based on ONLY their individual income.
Claiming 3 or more allowances:
If you claim 3 (or more) allowances, there won’t be much withheld from your paycheck.
Who should claim 3 or more allowances?
This depends on how many dependents you have and if you’re married or not.
If you’re married and have 1dependent, you can claim 3 allowances.
If you’re not married and have 2 dependents you can claim 3 allowances.
It really depends on the dependents and your marital status. Basically, you can claim 1 allowance for each adult and one 1 allowance for each dependent (child).
Should I Claim 0 or 1 Allowances?
So we went over what W4’s are, what tax allowances are, and how many allowances you can claim for certain situations.
Allow me to quote myself, “You should claim 0 allowances if someone is claiming you as a dependent, and you should claim 1 if you’re single and you have no dependents.”
If you’re still unsure here’s what you can do: you can leave a comment and I’ll do my best to help, you can go to the official W4 form from the IRS and go through the worksheet to find how many allowances to claim, or you can ask a tax professional directly.
Frequently Asked Questions About W4’s:
Can I change my W4 allowances?
You can change how many allowances you claim on your W4 (even if you already filed it with your employer).
If your tax / life situation has changed (if you got married or had a baby), just fill out a new W4 form, and give it to your HR or Payroll department.
When should I change my W4 allowances?
If you had a change in your life where your tax situation has changed, you should fill out a new W4 form to reflect these changes.
Some changes that might warrant a new W4 are:
- Getting divorced
- Having a baby
- Getting married
Where do I get a W4 form from?
You can get the most recent version of a W4 form directly from the IRS Website.
- IRS Tax Withholding Estimator – This calculator will help you make sure that you have the right amount being withheld from your paycheck. All you need to do is answer a few questions (such as how many dependents you have and how much you currently make).
- IRS W4 Form – Just in case you need it, this is where you can find the most recent version of the W4 form, you can also view information regarding child tax credits.