What to Claim on Your Payroll Checks
- The IRS allows you to claim allowances, which gives you a certain sum. Your employer subtracts your total allowance sum from your gross income to arrive at your wages subject to taxation. In general, the more allowances you claim, the less your federal income tax withholding; the less you claim, the more the withholding. Consequently, claiming many allowances can result in you receiving a higher take-home pay than if you claimed fewer allowances.
- Your employer is required to give new employees a W-4 form to complete. You state your withholding conditions, including claimed allowances, on the W-4. To claim allowances, complete sections A through G of the Personal Allowances Worksheet section of the W-4. You can, for example, claim an allowance for yourself if no one else is allowed to claim you as a dependent; one if you are single; one for your spouse; one for each of your dependents, such as your children whom you support; one for filing as head of household on your tax return; and one or two for each eligible child under the Child Tax Credit program. Enter the total from lines A through G on line H.
Complete the Employee's Withholding Allowance Certificate portion of the form. In box 5, put the total number of allowances you claimed on line H. Sign and date the form. Give the allowance certificate to your employer and keep the worksheet section for your records. - The majority of states require employers to withhold state income tax from employees' payroll checks. Procedures vary by state, but many have a system comparable to federal income tax withholding. To claim allowances for state income tax withholding purposes, complete your state withholding allowance certificate, similar to Form W-4, if applicable. State such as South Carolina and Colorado require that you use your W-4 form for state income tax withholding purposes.
- Consult IRS Circular E to determine the allowed sum for each claimed allowance. For tax year 2010, for example, according to page 37 of the 2010 Circular E, the IRS gives $70.19 per allowance for each weekly pay period; this amounts to $140.38 for a biweekly pay period. State allowance rates vary. The state of Georgia, for example, gives standard deductions and personal allowances. For 2010, the standard deduction for filing as single or head of household for a weekly payroll is $44.25; the personal allowance for a weekly payroll per claimed dependent is $57.50.
- If you claim more allowance than you actually have, you can end up owing taxes when you file your tax return. You can use the IRS withholding calculator, which shows you how to adjust your taxes so you do not overpay or underpay federal income tax.