<topic sku="dlxbiz" tNum="289043" author="sallyh" xmlns="x-schema:hhTopicSchema.xml"><index><title>Learn about withholding allowances</title><category>tax</category><klink type="cncpt">Tell me about withholding allowances</klink></index>
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<p>Use Form W-4 to tell your employer how many withholding allowances to use to calculate your federal and state tax income tax withholding. The more withholding allowances you claim, the fewer taxes will be withheld. You should claim enough allowances that you do not have a large tax overpayment. However, if you claim too many withholding allowances and don't have enough tax withheld, you may owe substantial taxes at the end of the year, possibly including interest and penalties.</p>
<p>Although you generally claim more allowances if you have more dependents, you can take other factors into consideration as well. For example, if you expect to have substantial itemized deductions, you can claim more allowances to avoid overwithholding. If you have other income such as interest and you do not pay estimated taxes, you can claim fewer exemptions so more taxes are withheld.</p>
<p>The IRS allows you to use any method you choose to determine the correct number of withholding allowances. After you use Money's Tax Estimator to predict your tax liability, you can use the Tax Withholding Estimator to determine approximately how much tax should be withheld from each paycheck and how many allowances you should claim. You can then ask your employer for a new Form W-4 to fill out.</p>
