How to calculate personal exemptions on taxes?

Question

On my W4, I am claiming 2 exemptions: 1 - single and 1 - For myself. So that's 2 exemptions on W4. However, when I am completing taxes for the year (ie. 1040A), i can only claim 1 exemption (myself). Why are the numbers different between the W4 and 1040A?

Answer 1

It's perfectly OK to put on your W4 either more or less exemptions than you will actually claim when you file.  The object is to set it so you don't actually owe any taxes, but you also don't want a huge amount withheld from your pay and then put back as a refund, since that's just loaning your own money to the IRS without getting any interest.

A person who's single with no dependents and who doesn't have large deductions available,  should take a small number of exemptions on their W2, no more than 2.

Answer 2

The W-4 has "allowances" which are used to determine the amount of withholding.  The more allowances, the less withholding of tax.

Your tax return has many ways to reduce your tax besides exemptions.  However, the W-4 only has allowances.  So an exemption on your income tax is usually counted as one allowance.   But, depending on your other circumstances such as other deductions or filing status, you might put extra allowances on your W-4 so that the correct amount of tax is withheld.