Your filing status also will affect your allowance amount. You get an extra one if you file as head of household; another if you claim child or dependent-care expenses of more than $1,500 a year.
Finally, any child tax credits you claim will be taken into account.
The total of all these considerations is the number of allowances listed on your W-4. This number probably will not be the same as the exemptions you claim when you file your return in April. With the W-4, you're figuring the credits and expenses upfront rather than subtracting them at the end, as you do on your 1040.
Deductions and Adjustments Work sheet If your life is a bit more complicated, so are your W-4 calculations.
If you itemize, have a second job or a working spouse, you'll need to complete the two worksheets on the back (Page 2) of the form.
The first is the Deductions and Adjustments Worksheet. This is necessary if you itemize expenses on Schedule A. With this work sheet, you'll take those deductions into account now so that your withholding will more accurately reflect them.
This work sheet also considers other income you might have, but which isn't subject to withholding, such as dividends and interest. Other adjustments to your income, popularly called above-the-line deductions, also are part of this work sheet's calculations. These include such things as alimony paid, deductible IRA contributions and student loan interest.
Your total Deductions and Adjustments allowances then are added to the number you figured on your Personal Allowances Worksheet on Page 1.
Two-Earners/Multiple Jobs Work sheet If you have two jobs or your spouse works, further withholding adjustments might be necessary. The second work sheet on Page 2 of the W-4 form will help you come up with the appropriate amount.
Working couples should do the calculations together. The IRS says withholding will be most accurate for two-paycheck families when all eligible allowances are claimed on the W-4 of the spouse with the larger income; the other spouse should then claim zero allowances.
This work sheet also gives you the opportunity to figure actual additional dollar amounts you would like withheld from your paychecks. This sometimes is necessary so that you won't end up with a big tax bill.
Online assistance While the W-4 form is one of the shortest IRS documents, that simplicity is overshadowed by the attached work sheets. The calculations often deter individuals from making the necessary payroll withholding adjustments.
But there is another way.
To help with the calculations, the IRS has created an online W-4 work sheet. The interactive calculator will walk you through the various work sheet scenarios and tell you just what number to enter on your W-4.