Did you receive a big tax refund or owe the IRS a lot of money for 2015? Then it’s time to update the form that tells your employer how to calculate your federal income tax withholding. That’s Form W-4, Employee’s Withholding Allowance Certificate, and here’s what you need to know.
Filing a new Form W-4 with your employer allows you to adjust your income tax withholding to avoid overpaying or underpaying tax for 2016. The form comes with a worksheet to figure out how many allowances you should claim. These allowances are similar to dependency exemptions on your income tax return. However, the total allowances on your W-4 don’t have to agree with the exemptions you claim on your return. For example, say you’re single and you want to have the maximum amount withheld from your paycheck. You can claim zero allowances on Form W-4. You’ll still claim your personal exemption on the federal income tax return you file next April.