What Do I Do on My W-4 Form If I Want Less Taxes Taken Out?

by Tara Thomas ; Updated March 15, 2018

The goal of most American taxpayers is to reduce their tax liability and hopefully receive a refund after tax season. However, for some wage earners, the goal is to have as little tax withheld from their paychecks as possible. Even though this practice might result in a sizable tax bill from Uncle Sam, if you play your cards right, you could end up breaking even without letting the IRS have interest-free use of your money for the year.

In order to change the amount of tax that is withheld from your paycheck, you need to increase the number of allowances you claimed when you filled out your W-4 form for your employer. That form determines the amount of money your employer withholds from each paycheck.

How Allowances Impact Your Tax Withholding

The number of allowances you claim on your W-4 depends on the number of exemptions you qualify for in addition to other factors. Typically, you are allowed a personal exemption for yourself, your spouse and for each qualifying dependent. These exemptions then determine how many allowances you claim depending upon your filing status.

You can increase the number of allowances you claim even further if you plan to itemize your deductions on Schedule A, if you qualify for a child care tax credit, or if you file as head of household. You can claim as many allowances as you’re eligible for, but the number of allowances does not necessarily have to match the number of exemptions.

Filling Out Your W-4 for Lower Tax Withholding

You probably filled out your W-4 when you first began working for your employer. Each job you have requires you to fill out a separate W-4 form. If you have two W-4s as a result of working two jobs, the IRS advises you to claim all your allowances on your highest paying job, and zero deductions on any others.

It's a good idea to recheck your W-4 and make adjustments whenever your life situation changes. For example, if you were single with zero allowances when you first started your job and two years later you're married with a child, you probably should increase your exemptions to reduce your withholding amounts. Your employer won’t ask you for an updated W-4 and neither will the IRS. It is your responsibility to make sure you have the most appropriate and up-to-date withholding amounts deducted from your paycheck.

Making adjustments to your W-4 isn’t as complicated as it may seem. You can request a new W-4 from your employer at any time. The IRS supplies taxpayers with worksheets that walk them through filling out this form. Check the IRS website for interactive tax assistance tools and publications that help determine the appropriate number of withholding allowances for your individual situation.

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What Happens When Less Tax Is Taken Out?

When you choose to have less tax withheld from each paycheck, your odds of a tax bill or a smaller refund increase. However, this doesn’t mean you’ll automatically have tax obligations when it comes time to file. Some taxpayers opt for having the maximum amount withheld from every paycheck by claiming no exemptions in anticipation of receiving a refund at the end of the year. This is helpful for workers who have trouble saving on their own, but the scenario isn’t ideal for everyone.

Allowing the IRS to hold on to a bit more of their paychecks makes it easier for some people to have a lump sum to do with as they please. Still, other taxpayers prefer to use any extra money per pay period for investing or using as they wish, rather than letting the IRS have interest-free use of it.

About the Author

Tara Thomas is a Los Angeles-based writer and avid traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. She began her writing career in college authoring grant proposals for a Southern California marine science laboratory, which helped her develop a lifelong passion for environmentalism. She has a Bachelor of Science in marine biology from California State University, Long Beach. Thomas is also an event consultant/planner, spent 10 years as a mortgage consultant and enjoys writing on the subjects of travel and personal finance.

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