Question

How should I claim my W-4 allowances? If I claim more exemptions than I actually have on my W-4, will it make a big difference in the taxes I owe?

Answer

If you’re wondering “How many allowances should I claim on my W-4?” it’s a question of semantics. You don’t claim exemptions on a W-4, just allowances.

  • On IRS Form 1040, exemptions can be claimed when you file your return.
  • On Form W-4, allowances can be claimed that will determine the amount of tax your employer will withhold from your paycheck.

Matching the Number of Allowances May Not Be Your Best Strategy

It’s important to remember that as you add allowances to your W-4 your tax withholding decreases and your take-home pay increases. The fewer allowances you claim, the higher your withholding and the lower your take-home pay.

Additional Pointers on the Number of Allowances W-4 Form Allows

You can also increase allowances for situations other than having dependents.

For example, if you expect to have a large amount of itemized deductions that will lower your tax, you may not need to have as much withheld. Then, you can claim additional allowances.

Keep in mind though that if you claim too many W-4 allowances, your employer probably won’t withhold enough tax so you could end up with a large balance due. The amount of the balance due will depend on the difference between the tax withheld and your overall tax liability for the year. There might also be an underpayment penalty for not paying in enough tax during the year.

There are worksheets that come with the W-4 that help you figure out the correct number of allowances to claim. The more effort you put into figuring allowances, the more accurate your withholding will be.

Although it is late in the year, if you were disappointed in the size of your refund or you had an unexpected balance due when you filed your 2018 tax return, it is not too late to make changes for 2019. These changes may involve decreasing the number of allowances on Form W-4 or asking your employer to withhold an additional amount from your remaining paychecks.

“How Many Exemptions Should I Claim?”

For guidance on claiming tax exemptions on the new Form 1040 or figuring out how many allowances to claim on your Form W-4, get help from one of our tax pros. Find a tax office nearest you.

Looking Ahead to 2020

The IRS has revised the Form W-4 and instructions for 2020. The redesigned form will not use allowances. There are just a few required steps, such as entering your name and social security number. Then you have the option of completing more steps for better withholding accuracy. Employees with more complex situations, such as second jobs and family tax credits, may want to do the additional steps. If you have a W-4 on file with your current employer in 2019 you are not required to fill out the new W-4 in 2020, but it may be to your benefit to do so. Here is some additional information about the 2020 Form W-4.

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