Your income tax liability changes from time to time as it reflects changes in your income, a different filing status, the number of your dependents and other contributing factors. But you're not locked into any certain time period during which you're prevented from changing the number of your payroll allowance exemptions. The IRS allows you to change the number of your allowances as frequently as you need to, so that you can keep the withheld tax amounts from your paychecks closely aligned with your year-end tax liability.
To help eliminate the guesswork of choosing the appropriate number of W-4 allowances, the IRS recommends using its online withholding calculator tool to perform a "paycheck checkup" each year. Access this tool at IRS.gov by searching for "IRS withholding calculator."
Determining Your Exemption Status
Your federal income tax amount depends on the filing status and allowances you put on your W-4. Without the form, it’s hard for your employer to accurately compute the withholding. This is because filing status and allowances are singularly and directly linked to employees’ personal and financial situations. Whenever you undergo certain life changes, you should revisit your W-4 and update it, if applicable. Provided the change is legitimate, there’s no limit on the frequency with which you can change your exemptions.
Changing Circumstances and Exemptions
During the year, you may encounter some life changes that require you to change your exemptions. If you obtain a second job, your income increases and so does your tax liability; therefore, you’ll need to update your W-4. If it’s a side job that does not require a W-4, you may adjust your W-4 with your main employer to have more taxes taken out of your paychecks. If you get married or divorced, adjust your W-4 to reflect your new filing status.
Married status typically qualifies you for certain deductions and credits, while divorced status puts you back to single, which is a higher tax bracket and takes away many tax advantages. If your spouse obtains a job, you may need to modify your allowances because both of you cannot claim the same allowances on your W-4s. If you have a baby or adopt one, fill out a new W-4 claiming the child as a dependent, provided no one else claims her as such.
Claiming an Exemption
If you qualify for, and claim, exempt on your W-4, your employer does not withhold federal income tax from your wages. Claiming exempt is good only for the current year. Submit a new W-4 to your employer if you meet the next year’s criteria for exempt. It is important to remember that exemption requirements can be quite stringent. A detailed breakdown of these exemptions can be found not the Internal Revenue Service website. It is strongly recommend that you review these before completing your W-4 for the year in question.
The Time Frame For Changes
Submit a new W-4 to your employer within 10 days if the event lowers the number of allowances you can claim or if you undergo a divorce and were claiming married status. For example, if you had five allowances, which include your son who is no longer your dependent, submit a new W-4 showing four allowances to your employer within 10 days.
Otherwise, you can change your W-4 whenever you want to change your number of allowances. If in a calendar year you had an event that will cause a reduction in your allowances for the next year, submit a new W-4 to your employer by Dec. 1 of the year the event occurred. Submit the form within 10 days if the event happens in December.
For state income tax withholding, the state might require your employer to use a withholding process that is comparable to federal income tax withholding. For example, if you work in Georgia, make changes to your state income tax withholding conditions on Form G-4. The state revenue agency can give you specific guidelines that apply to state income tax withholding.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.