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To amplify Peter's response, you are entitled to use the foreign earned income exclusion when calculating your withholding allowances. There's nothing wrong with your adjusting so that the correct amount is withheld

Hey Phil and Peter,

Thanks for the response. If I understand what you are saying correctly, I can use the adjustments and deductions part of the worksheet on the W-4 to claim additional allowances.

Putting my 80K foreign earned income exclusion as an adjustment to my income in the W-4 worksheet, running the formula, and adding that to my other allowances, I come out with 28 total allowances for the W-4.

I guess that will do the trick, but it seems strange to have 28 total allowances on my W-4.

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