Paying too much in payroll taxes? Have a large annual tax return? The Department of the Treasury's Internal Revenue Service (IRS) requires the majority of employers to obtain a Form W-4 from their employees. This form is titled "Employee's Withholding Allowance Certificate. It collects some personal information from name, social security number, home address, etc.
Because of its official documentation, block 3 is usually confusing for new to uneducated employees. This block requires a check mark next to Single, Married, or Married, but withhold at higher Single rate. Most of these workers make the mistake of confusing withholding allowance as dependents. This is incorrect and the withholding allwance claimed is a monetary amount withheld based on wages earned.
For instance, according to the IRS's Publication 15, (Circular E), Employer's Tax Guide, 2018, a Single Person receiving a semimonthly payroll wage of $1,000, claiming "0" withholding allowances is $95 per payroll period. See chart below for more information.
It is easy to see that the more one earns, the larger the deduction in withholding; however, the more withholding allowances claimed, the less that is pulled per wage earned.
In order to obtain a new Form W-4, it is recommended one seeks her or his Human Resource (HR) department and request to update the withholdings allowance data. If one is unsure what proper level of taxes are to be withheld, then the IRS provides a Withholding Calculator to help one determine her or his best needs.
The calculator assists in determining
the recommended Filing Status based
on selected salary, number of jobs,
and more information a taxpayer