- 1). Claim exempt on your W-4 form, if you qualify for it. If you claim exempt, your employer does not withhold federal income tax. Read the W-4 for the tax year in question to ensure you meet the exempt guidelines. For example, you are exempt in 2011 if in the prior year you had a right to a refund of all your federal income tax withheld because you owed no federal income tax and in the present year you expect a full refund because you do not foresee owing any federal income tax.
- 2). Increase the number of allowances on your W-4. The IRS allows you claim allowances (see lines A through G of the W-4), which reduces your taxable wages, and in most cases, your federal income tax withholding. Suppose you claim two allowances but are entitled to four. In 2011, one withholding allowance for a weekly payroll is $71.15 (see page 35 of IRS Circular E), two is $142.30 and four is $284.60. Your employer subtracts your total allowances from your gross wages. The remainder is your taxable wages.
- 3). Do not claim allowances that you do not qualify for. This can cause you to owe the IRS when you file your tax return.
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