So what is the correct W-4 withholding for me?
The easiest answer is - whatever gives you the desired result at year-end. Some clients prefer large refunds, some small refunds, and a couple would rather owe (no kidding). I will make the assumption you would prefer a small refund. Anyway, here are some common mistakes to avoid:
2020 Update - The "new" Federal W-4 uses dollar amounts instead of exemptions - so a child under 17 years old is $2000 and all other dependents are $500. So substitute these dollar amounts in place of the number of dependents as appropriate.
1) The more exemptions ($$$) you claims, the LESS tax is withheld. Claiming S-0 will result in the MAXIMUM tax being withheld. Claiming M-9 will result in the MINIMUM tax being withheld. If you claim "EXEMPT" then NO tax will be withheld.
2) If you are a two-income household and both work, do NOT used the married tax tables. Those assume you have a non-working spouse. If there are just two of you on the tax return (and nothing else - no kids, no house, etc..) and your incomes are nearly equal, both of you claiming S-0 will result in just enough tax being taken out so you do not owe. BTW "Single" and "Married but withhold at the higher Single Rate" are IDENTICAL. The W-4 is not a legal document attesting to your marital status. You are just telling the IRS how much money to withhold from your paycheck.
If you both claim M-0, that is about the same as both of you claiming S-3. And both of those are very wrong and will result in a substantial amount due when you file. If only one spouse works and you file MFJ then that person may claim M-0 and you won't owe when you file.
3) If your incomes are VERY unequal (say $90K and $10K) the higher wage earner may claim "S-1" and the lower wage earner S-0. REASON - the person who makes $10K would normally owe no tax at all, so claiming dependents would result in almost zero withholding. But when that $10K is added to the $90K, it is taxed at a much higher rate.
4) If you work a second (or third) job claim S-0 at ALL of those additional jobs. Same reasoning as above - someone who makes $5K per year would owe no tax. But add that to your $45K primary job and the tax rate on the $5K needs to be the tax rate on your total income which is $50K. Job "A" does not know about Job "B" or Job "C". Plan accordingly.
5) When I do your tax return, part of the job is planning for any and all changes that may occur the following year. I can easily show you the effect of adding a child, house, going to school, whatever - and how to adjust your W-4 accordingly. The above are general guidelines only.