Business & Finance Taxes

How to Choose Federal Income Tax Withholding

    • 1). Complete the personal allowances section of the W-4 form. This will help you determine how many exemptions you are eligible to claim.

    • 2). Determine how many exemptions that you want to claim. The more you claim, the less money you will have withheld from your paycheck, but you may end up owing more at tax time. If you claim fewer exemptions, you will have more money taken out of your paycheck, but you will likely be entitled to a refund at tax time.

    • 3). Write the number of exemptions that you decide to claim on line 5 of the W-4 Employee's Withholding Allowance Certificate. If you have no other sources of income, this is usually all you need to do. You may change your number of exemptions whenever your situation changes, such as with the birth of a child.

    • 4). Determine if you want any additional money withheld from your paycheck for tax withholding. For example, if you work as a freelance writer on the side and would prefer to have money deducted from your paycheck at your main job, you can have an additional amount withheld.

    • 5). Write the additional amount you want withheld on line 6 of the W-4 Employee's Withholding Allowance Certificate. Your employer will determine the total amount that needs to be withheld based on what you have written in lines 5 and 6.

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