Glossary
Withholding Allowance
A withholding allowance was a number you claimed on IRS Form W-4 to reduce how much federal income tax your employer withheld from your paycheck. The more allowances you claimed, the less tax was withheld. This system was replaced by a new W-4 form starting in 2020.
Do withholding allowances still exist?
No. The IRS eliminated the use of allowances in 2020. The new W-4 form uses a more detailed approach based on income, dependents, and deductions.
What replaced withholding allowances?
The new W-4 asks for specific dollar amounts for income, dependents, and deductions to more accurately calculate how much tax to withhold.
Why were withholding allowances eliminated?
The old system was too vague and often led to under- or over-withholding. The new form aims to match your actual tax liability more closely.
What should I do if I haven’t updated my W-4?
You’re not required to update it unless your situation changes, but doing so can help ensure more accurate tax withholding and avoid surprises at tax time.
How can I make sure enough tax is withheld now?
Use the IRS Tax Withholding Estimator to adjust your W-4 and avoid large tax bills or refunds.
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