The American tax code is fearfully complex. The IRS dispenses of an annual budget of billions of dollars and employs tens of thousands of accountants, agents and other support staff in order to administer this unwieldy system. Although the federal system of taxation is nominally "progressive," it can feel unfair to folks who don't earn very much money each year.
In particular, the somewhat punitive system of withholding large sums of taxpayers' income for months on end can be frustrating for those who need the full amount of their earnings to pay for day-to-day expenses. The tax refunds that typical taxpayers receive after filing their taxes are often less effective at creating and preserving wealth than the lower withholding rates that the government periodically enacts.
When you're hired at a new job, you'll need to fill out a fresh W-4 form that helps the IRS determine how much to withhold from each of your paychecks. The "withholding allowances" that you claim will determine the exact amount of take-home pay that you earn each week and will indirectly affect the size of your post-filing tax refund. If you can claim multiple allowances, your taxes will be withheld at a fairly low rate.
However, this seemingly favorable arrangement comes with a considerable cost: If the IRS fails to withhold an adequate amount of money from each of your paychecks, it may determine that you'll be liable for additional tax payments at the time of your filing. This can seriously interfere with your budgeting practices and may force you to raid your savings in order to remain current on your tax obligations.
Your demographic profile, current living situation and several other factors will affect your withholding practices. For starters, you can't claim any allowances if you're already being claimed as a dependent on your parents' tax return. Before you fill out your tax return, you should talk to your parents or legal guardians to determine whether they're using you to reduce their own tax liabilities. If you wish to change this arrangement, you should ask your parents to stop claiming you as a dependent.
There are certain other items for which you may be able to claim withholding allowances. For instance, you can make allowances for any itemized deductions for which you're eligible. To determine exactly what you can claim, visit the IRS's website or talk to a seasoned tax professional before filling out your W-4.