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.