Personal Allowances

• To claim your personal allowances, complete the Personal Allowances Worksheet section of your W-4. Complete lines A through G as it relates to your personal situation. For example, claim one for yourself if you cannot be claimed as a dependent by anyone else; claim one if you are single or married and work only one job, or if you or your spouse meet the wage criteria for a second job; one for your spouse; one for each of your dependents, such as your children, whom you will claim when you file your tax return; one for head of household status if you meet the requirements stated on the W-4; one for dependent or child care expenses, if applicable; and one or two for each eligible child under the child tax credit program. Tally all the lines and put the total on line H. Keep the worksheet for your records.
  
  

Withholding Certificate

• Complete the bottom portion of the form -- the Employee's Withholding Allowance Certificate section. Include your filing status on line 3. Generally, single withholds at a higher rate than married. You can check the "Married, but withhold at a higher single rate" box if you are married but want more taxes withheld. Claim Single as your filing status if you are legally separated from your spouse or if he is a nonresident alien. Put the total number of allowances you claimed on line H of your Personal Allowances Worksheet on line 5 of the form. Sign, date and give your employer this section of the form. If you can claim exempt from federal income tax withholding on line 7 if you meet the criteria stated on the form.
  
  

Calculation

• To determine wages subject to taxation, your employer subtracts the total sum for allowances from your gross earnings. Your employer uses IRS Circular E for the appropriate tax year to determine the sum per allowance based on your payroll period. For 2010, the IRS gives $14.04 per allowance for a daily payroll; $70.19 for a weekly payroll; $140.38 for a biweekly payroll; $152.08 for a semimonthly payroll; and $304.17 for a monthly payroll. Your allowance sum lowers your taxable wages, so the more allowances you claim, the less federal income tax you pay.
  
  

Considerations

• Be careful of claiming allowances that you are not entitled to, as this can result in you owing the IRS. Furthermore, the IRS can charge you a $500 penalty for submitting a false W-4. Review your personal and financial situation periodically, and complete a new W-4 each year, if necessary. You can use the IRS withholding calculator to help you determine if you need to submit a new W-4.