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When you’re finally hired after graduation, you will need to fill out a lot of important paperwork; one such form will be the W-4 form. If you’ve had a job before, you’ve undoubtedly seen one of these forms all ready, but since you’ll hopefully be making more money this time around (and thus paying more in taxes), what you claim to have withheld on your taxes will be that much more important.

Claim too many withholding exemptions on your W-4 and you’ll end up paying the government when you file your taxes. Claim too few withholding exemptions and you’ll end up lending Uncle Sam your money interest-free. That’s not as bad as owing money, but why give up the interest on your money and the use of that money during the year?

Ideally you should claim the number of exemptions that will result in withholding as close to what you owe as possible. Also, don’t forget that there are many things that can change your tax status throughout the year, thus it’s also a good idea to review your exemptions throughout the year to ensure that you’re still on track. According to About.com, you should do this in early November, to give you time to make adjustments by the end of the year (especially if it looks like you’ve been under-withheld), and then again after you’ve completed your income tax return for the previous year, so you know exactly where you stand.

Deciding what to withhold is up to you and depends entirely on your personal situation – so I’m not even going to bother trying to recommend a number for you, because what is right for me or your roommate, might not be right at all for you or for your boyfriend, etc. What I will recommend, however, is that you gather all of your information – what you’re going to be making this year, what you made last year, how many dependants you have, how many people claim you as a dependant, etc. – and work through the IRS 2008 Withholding Calculator, which will tell you what is best to claim; good luck.

(image by aloha_pineapple)

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