What to Claim for Exemptions From Withholding on a W-4
- Without your W-4 form, it is difficult for your employer to appropriately figure out your federal income tax withholding. Withholding is collectively based on your wages, the IRS Circular E's tax withholding tables, and the filing status and allowances or exemptions that you put on your W-4. If you fail to submit a W-4, the IRS requires your employer to withhold at the highest tax bracket of single filing status with zero allowances.
- The Personal Allowances Worksheet section of your W-4 has the conditions under which you claim exemptions. What applies to you might not apply to another employee. Examine lines A through G of the form to see which allowances you are entitled to claim and put the exemption amount on the respective line. For example, if no one else can claim you as a dependent, put "1" on line A. If you are married with one job and your spouse is unemployed, put "1" on line B. If you have two children whom you support and who meet the IRS' "qualifying child" criteria, put the "2" on line D. Your allowances from lines A through G equal your total exemptions, which you put on line H of your W-4 and on line 5 of the bottom portion of the form.
- The IRS publishes the amount each exemption is worth its in annual Circular E. To know the value of your allowances, find the percentage method table in the Circular E for the respective tax year. For example, if you have four allowances and get paid weekly in 2011, your total allowance equals $284.60 -- this amount is subtracted from your gross wages and reduces your income that is subject to taxation.
- The IRS can charge an employee who submits a false W-4 a penalty of $500. If required, use the IRS withholding calculator to help you figure out what to claim on your W-4 and whether you need to submit a new form to your employer. The calculator helps you to adjust your W-4 so you pay the right amount of federal income tax. If you meet the requirements for exempt from federal income tax, as stated on the W-4 for the appropriate tax year, claim exempt on line 8 of the form and submit it to your employer. If you qualify for exempt, your employer does not withhold federal income tax from your paychecks.