Withholding is the amount of federal income tax taken out of your paycheck. The amount of income tax your employer withholds from your regular pay depends on two things:
- The information you give your employer on Form W–4.
- The amount you earn.
Some sub-factors for how you determine your earnings can be found in this article.
Entering information on your W-4
By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period.
If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period
The higher the number goes, the less tax is taken out each pay period, but that might mean you might owe at the end of the year. Most clients still go with " 0" allowances on line 5.
You can always add extra withholding– extra withholdings means an additional amount is deducted each payroll, on top of the regular withholding deduction amount.
There are pros and cons to adding additional withholding or not
State and federal tax withholding amounts get reconciled through personal tax returns at the end of the year. This means if taxes were over-withheld, employees may see larger tax refunds. Alternatively, if taxes were under-withheld, they may owe more at the end of the year.
If you'd like, you can add " additional withholding" but then your net pay might be smaller. However, the upside is that you might not owe anything when you file your personal return.