If you've ever gotten a job you will remember the W-4 tax form.
This is the form you fill out at the beginning of employment, indicating how much employers should withhold in state and federal taxes from your paycheck.
Your employer is required to keep the form on file, and if asked must provide these forms as proof they are maintaining proper tax withholdings.
The information you provide on your W-4 tells your employer how much to withhold from your paycheck. The main information you provide on your W-4 form is the number of dependents you claim. This includes yourself and possibly your spouse and children.
You can claim as many dependents as you want, as long as it's not too few. The more dependents you claim on your W-4 form the more money is taken out of your paycheck. Some people artificially increase the number of dependents to put away money for a tax refund later.
When You Should Update Your Form
You will be expected to update your W-4 if your situation changes. If you get divorced and your spouse was a dependent, you will want to update your W-4 to reflect one less dependent. If you are having a child you can update your form to add a dependent. A new born child is good as a dependent for the entire year in which he or she is born.
Second and third jobs can make filling your W-4 messy. You may or may not want to leave yourself out as a dependent on a second job, as doing so could cause too little to be taken out of your paycheck.
You can also update the W-4 to receive more money in your paycheck.
Another claim you can make on your W-4 form, if your income in under around $47,000 a year, is payments from the Earned Income Credit. Instead of taking this credit at the end of the year, you can receive extra money in your paycheck by claiming it on your W-4.
You can also get your tax credits for child care expenses early on your W-4 if you will claim over $1,500 in expenses. But be careful, a common mistake is to claim child support payments not employment care expenses on your W-4. The option is to report child care expenses related to employment only.
A W4 calculator can help determine the number of withholding allowances you should claim.