I remember when I got my first job and was handed a W-4. I had
no idea what it was or how to go about filling it out. For
starters, the whole "allowance" thing threw me off. As far as I was
concerned, an allowance was something my parents gave me for doing
chores when I was a kid.
Then there was the "exemption from withholding" language that
made no sense to me. Was I, or was I not, exempt?
I'm sure plenty of high school and college graduates are asking
the same questions now as they start their first jobs and fill out
a W-4 form for the first time. So let's go over the basics:
Why do I need to fill out a W-4?
The information you provide on the form helps your employer figure
out how much federal income tax to take out -- or withhold -- from
What's an allowance?
An allowance reduces your taxable income. The more allowances you
claim, the less tax will be withheld.
So on the
Personal Allowances Worksheet
you can enter a "1" on line A for yourself if your parents aren't
claiming you as a dependent on their W-4 forms (ask them). Then on
line 5 on the actual W-4 form, you can enter a "1." However, you'll
be given the option to claim more allowances. The question is
whether you should.
I don't want to pay a lot of taxes, so shouldn't I claim as
many allowances as possible?
No. You can, for example, claim an additional allowance if you're
single and have only one job and have less tax withheld. But if you
don't pay Uncle Sam during the year, you'll owe at tax time in
April. Recent grads who are single and have no dependents will
probably get their tax withholding right by claiming "1"
If you claim "0" allowances, though, you'll probably have too
much withheld and will get a fat refund next spring. It sounds
tempting, but you'll have less money to spend during the year, and
you'll be giving the government an interest-free loan by letting it
withhold too much from each of your paychecks. Our
easy-to-use withholding calculator
can help you figure out if too much is being taken out of your
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