New job? Did they hand you a Form W-4 to fill out? Confused?
Well you aren’t alone.
This form seems to confuse a lot of people.
What you are doing is telling your employer how much to withhold from your paychecks.
The higher the number of allowances, the less they withhold and the less you have paid in for the year. This can result in a larger balance due or a smaller refund.
The lower the number of allowances, the more they withhold. More money paid in. Higher refund or lower balance due.
So, if you can, err on the side of bigger refund. It means less take home pay though. But it is either pay now in smaller amounts throughout the year or pay later. And remember, there are penalties for not having enough paid in (depending on the circumstances).
Also, if you mark Married, they withhold less than if you mark Single or Married but withhold at the Higher Single Rate.
The amount you get paid, along with the frequency of getting paid is looked up in a chart every week and assumes you get paid that same amount over the whole year. The goal, according to the IRS, is to break even. However, many other things influence your tax including: number of children, adjustments, deductions and credits.
Also, you can change your W-4 with your employer at any point during the year AND you can have a specific extra dollar amount taken as well.