The beginning of a new year is a good time to review the allowances you've claimed on your W-4 form (Employee’s Withholding Allowance Certificate).
Each allowance claimed reduces the amount of federal tax withheld. The more allowances claimed, the less tax is deducted, giving you more money in your pocket each pay period.
The goal is to withhold enough tax each pay period so that you will have paid most or all of your taxes owed by the end of the year.
What W-4 Allowances Should I Claim?
You get one allowance for yourself, one for your spouse, and one for each dependent you report on your tax return.
Marital status can increase or decrease the amount of taxes withheld. Single or Married Claiming Single results in more taxes being deducted.
Working part-time also impacts your tax deductions. There are minimum earnings requirements that you must meet before taxes are deducted from your paycheck. These minimums are based on your pay-period frequency, your marital status, and the number of allowances claimed on your W-4. You can potentially have no taxes deducted from your paycheck if you only worked a few hours in a pay period.
How Do I Avoid Owing Taxes?
If you end up owing taxes, you will need to either increase the taxes being deducted from your paychecks or begin paying quarterly estimated tax payments to the IRS.
If you are claiming the correct marital status and the correct number of exemptions but still ended up owing money on your tax return, you might want to consider adding an extra dollar amount to be deducted from each paycheck. This will ensure that you have some taxes deducted regardless of how much you earned.
If you need to make changes to your tax withholding, you should submit a new W-4 to your employer as soon as possible.
For more information about W-4 allowances, consult your income tax professional. They have the knowledge about your personal situation to advise you about completing your W-4 form correctly.