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HI,

What you want is for your payroll deductions to nearly match your tax liabilty. You can do that by calculating your expected taxes and having the correct alocation deducted each payday. Or, you can use the form on the back of the W4 to calculate the number of deductions to put in the W4 box. I have seen people with eight or ten on the W4. They had large mortgages and heavy property tax bills combined with their children. Thus they had a relatively small tax liability.

You just need to do enough calculating to be sure that the tax required, matches the payroll deductions within the safe harbor to prevent penalties. See IRS publication 19, section 5, page 42, for a good discussion of "witholding and estimated taxes". If your company payroll office has a W-4 Form, the instruction on it may give you enough information to work out your needs.

You don't want to give the govenrment too large a loan by having too much taken out. A little tax refund is probably ok.

Regards
Pat
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