Form W-4 is one of the few forms that any newly hired employee must complete before they start working. It is used to allow your employer to withhold your taxes. Since the Internal Revenue Services requires taxpayers to pay their taxes gradually throughout the year, it is the only way to do so.
Although you must complete the form before you start working, in some cases, you can complete it right before your first paycheck is calculated but sooner the better.
How many allowances should you claim
If you’re married, you can claim one allowance for each depended you have. So if your spouse doesn’t work and you have two kids, you can claim four dependents in total. If you have three kids, you can claim five and so on.
For single individuals, the best option differs from person to person. If you want to get most of your paycheck, lesser allowances you claim the better. So it would be zero. Claiming zero allowances basically mean that the maximum amount of taxes will be withheld from your paycheck. As you exceed your tax liability, this will put you up on a large tax refund.
Claiming one allowance means that less tax will be withheld from your paycheck. At least compared to claiming zero allowances. So if your filing status is single and you don’t really mind getting a smaller tax refund or not getting anything at all, it’s going to be the safest option.
Claiming more allowances
Under federal law, you can claim up to 99 allowances but it wouldn’t be a great deal since you are likely if not certainly to underpay your taxes and face a fine for doing so.
Understanding how income tax works which is basically a pay as you go tax which means you cannot wait until the end of the year to pay all your taxes. Overall, the conclusion would be if you claim more allowances, you will receive a higher paycheck while withholding less tax and vice versa.