Increase or decrease amount to be withheld each pay period?
If you know that your tax situation is not easily handled by the standard withholding table then you can use that line to ask for additional funds be withheld. You could also ask for less money to be withheld.   Why would somebody do this? They had a small side business that made them extra income, and wanted to withhold extra money from their full time job to cover the extra income. They might have been awarded a big bonus and it caused too much in taxes to be withheld so they wanted to not have as much taxes from their regular pay check. Given the fact that you are young, in your first real job, and almost the entire tax year ahead of you, it is likely that the standard tax tables will be close enough. So leave the line blank or put zero.
"You are not interpreting the table correctly. The $20K ""base rate"" that you think should have been eliminated is in fact the total tax for the whole bracket. You only dipped partially into the bracket, and the $3K reduction accounts for that. Look at the table again: What it means is that if you earn $100K, you will pay $6897.50 + 25% of (100000-50400) = $12400. If you earn $140000, you'll pay $26835 + (140000-130150) * 0.28 = $2758. So why the difference between $26835 and $6897.50? That's exactly 25% of $79500, which is the difference between $130150 and $50400 - the whole value of the bracket." When you adjust your investments the following will happen: Initial condition: Modified condition: This means that after this change you will note that the amount of federal tax you pay each month via withholding will go up. You are now contributing less pre-tax, so your taxable income has increased. If you make no other changes, then in April you will either have increased your refund by 6 months x the additional $25 a month, or decreased the amount you owe by the same amount. There is no change in the total 401K balance at the end of the year, other than accounting for how much is held pre-tax vs. Roth post-tax. Keep in mind that employer contributions must be pre-tax. The company could never guess what your tax situation is. They withhold money for taxes based on the form you fill out, but they have no idea of your family's tax situation. If you fail to have enough withheld, you pay the penalty — not the company. *The tax savings are complex because it depends on marital status, your other pre-tax amounts for medical, and how much income your spouse makes, plus your other income and deductions. Biweekly pay for salaried employees is typically calculated as Annual-salary / 26. Twice a month pay for salaried employees is typically calculated as Annual-salary / 24. If you were getting paid twice a month and now are getting paid every other week, your paycheck will be roughly ( Twice-a-month-paycheck-amount * 24 / 26 ).  If you were paid $1000 twice a month, you'll be paid $923 every other week.   $1000 * 24 = $24K and $923 * 26 = $24K.   You will get paid every other week regardless of month boundaries on a biweekly pay cycle. Follow the instructions on the W-4. It says exactly how you are supposed to calculate the number of allowances. You shouldn't have to figure out how to get the right number. Just follow the instructions. The only part at all complex is if you have large deductions. In that case you're supposed to subtract a standard amount from your actual deductions -- for 2017, $12,700 if married filing jointly -- divide by $4,050, and then add the result to the number of allowances. In general, following the instructions on the W-4 should result in slightly more tax being withheld from your paycheck than you actually owe, so that you get a modest refund next April 15. In the long run it doesn't matter if you have too much withheld, as you'll get it all back eventually anyway. I suppose the withholding could be so high that it doesn't leave you enough to live on while waiting for your refund, but that shouldn't normally be the case. If you pay too little, you could be subject to penalties and interest, so you really want to avoid that. "Two comments on your calculations: I worked for many years at a community college (Ontario, Canada) where I received an annual salary for the contract period Sept 1, Year N, to August 31, Year (N + 1). For most of that time, the system was 26 pay-cheques a year, one every 14 days. Payroll made most mandatory deductions (union dues, pension, etc.) on a monthly basis, assigning them to one or the other of the two cheques each month.  So there was a fairly large variation in the net amount received in the two cheques.  Plus there were those two ""extra"" cheques each year with very few deductions. (as in the answer of @Kate Gregory) Additionally, Payroll was smart enough to make the last cheque of the contract year for a slightly odd amount, just the correct amount to bring the total gross amount paid to the actual contractual salary, evening out any extra days or rounding error. They would restart the payment schedule anew on the second Thursday in September." Yes, you can do what you are contemplating doing, and it works quite well. Just don't get the university's payroll office too riled by going in each June, July, August and September to adjust your payroll withholding! Do it at the end of the summer when perhaps most of your contract income for the year has already been received and you have a fairly good estimate for what your tax bill will be for the coming year. Don't forget to include Social Security and Medicare taxes (both employee's share as well as employer's share) on your contract income in estimating the tax due. The nice thing about paying estimated taxes via payroll deduction is that all that tax money can be counted as having been paid in four equal and timely quarterly payments of estimated tax, regardless of when the money was actually withheld from your university paycheck. You could (if you wanted to, and had a fat salary from the university, heh heh) have all the tax due on your contract income withheld from just your last paycheck of the year! But whether you increase the withholding in August or in December, do remember to change it back after the last paycheck of the year has been received so that next year's withholding starts out at a more mellow pace. First, I'd use an online tax calculator to figure out you total tax tab for the year. Then look through Circular E and figure out from there how much tax you should pay for the rest of the year and work backwards to calculate the number of allowances to get there.  Two friendly warnings - Since you are doing this midyear, you'll need to repeat this exercise as we go into 2017. These next 6 months, you'll be withholding less than normal to make up for the high holdings so far. Second, a withholding is like saying tax/don't tax me on $4050. So in the 25% bracket, it's +/- $1000 in tax paid. You can adjust closer via the line 6 on W4 'additional withholding'. For federal taxes the rule is fairly straight forward, assuming that nothing else changes during the year.  If you know your marginal tax rate (the rate that your last dollar of income is taxed at) last year then adding or subtracting an allowance on the w-4 form will move the amount withheld by rate x Personal exemption amount. The personal exemption for federal taxes in 2017 is $4,050. Lowering the number of allowances on the Federal W-4 increases the amount of money withheld during the year.  So for your federal W-4 form lowering the number of allowances by one if you are in the 25% bracket will cause an additional 25%x4050 or  ~$1012 a year to be withheld. Of course making the change 5/12ths of the way trough the year will mean that it will only increase the  the amount withheld the rest of the year by (7/12) * $1012 or ~$590 for the rest of the year. State taxes can be more complex due to issues regarding tax brackets, and the differences in how they calculate their taxes. Most state websites have a worksheet for making an adjustment  to their version of the W-4. Here is the form DE-4 form for California In your situation getting the numbers on the federal and state forms will be much more complex, because your combined  income for 2017 will be significantly different than your combined income for 2016.  In the case of multiple incomes getting the withholding correct is much harder even with stable income. The trick is that making the adjustment on the job with the highest income may not move the amount withheld as much as you expect. For example if the largest income is only withheld at the 15% rate but your combined income from all your combined jobs results in you being in the 25% bracket, then the above calculation would only move the amount withheld by $354 instead of $590. A couple of notes: the number of allowances on the federal and state W-4 forms don't have to match. Mine almost never do. The number of allowances on the W-4 forms doesn't have to match the number of exemptions on the 1040 form. I was looking for ideas on what the usual figures are in such positions. Something like market value, or other terms such as changing slab percentages in compensation. Not sure what the best practices are in this situation.  Not sure what you are referring to. You can file a revised W-4 with your employer claiming more allowances than you do now. More allowances means less Federal tax and (if applicable and likely with a separate form) less state tax. This doesn't affect social security and Medicare with holding, though.  That being said, US taxes are on a pay-as-you-go system. If the IRS determines that you're claiming more allowances than you're eligible for and not paying the proper taxes throughout the year, they will hit you with an underpayment penalty fee, which would likely negate the benefits of keeping that money in the first place. This is why independent contractors and self-employed people pay quarterly or estimated taxes. Depending on the employer, they may require proof of the allowances for adjustment before they accept the revised W-4. "I have a related issue, since I have some income which is large enough to matter and hard to predict. Start with a best guess. Check what tax bracket you were in last year and withhold that percentage of the expected non-withheld income. Adjust upward a bit, if desired, to reflect the fact that you're getting paid more at the new job. Adjust again, either up or down, to reflect whether you were over-withheld or under-withheld last year (whether the IRS owed you a refund or you had to send a check with your return). Repeat that process next year after next tax season, when you see how well your guess worked out. (You could try pre-calculating the entire tax return based on your expected income and then divide any underpayment into per-paycheck additional withholding... but I don't think it's worth the effort.) I don't worry about trying to get this exactly correct. I don't stress about lost interest if I've over-withheld a bit, and as long as your withholding was reasonably close and you have the cash float available to send them a check for the rest when it comes due, the IRS generally doesn't grumble if your withholding was a bit low.  (It would be really nice if the IRS paid us interest on over-withholding, to mirror the fact that they charge us interest if we're late in returning our forms. Oh well.) Despite all the stories, the IRS really is fairly reasonable; if you aren't deliberately trying to get away with something, the process is annoying but shouldn't be scary. The one time they mail-audited me, it was several thousand dollars in my favor; I'd forgotten to claim some investment losses, and their computers noticed the error. Though I still say the motto of the next revolution will be ""No taxation without proper instructions!""" "The heart of the question is: why can't Bill just pay whatever he owes based on his income in that quarter? If Q2 is gang busters, he'll increase his tax payment. Then if Q3 is surprisingly slow, he'll pay less than he paid in Q2. I think what's most interesting about this question is that the other answers are geared towards how a taxpayer is supposed to estimate taxes. But that's not my objective -- nor is it Bill's objective. My [his] real objective is:  In other words, the answer to this question either needs to deal with not overpaying, or it needs to deal with mitigating the underpayment penalty. AFAICT, there are 2 solutions: Solution 1 Figure your estimated taxes based on last year's tax. You won't owe a penalty if your withholding + estimated tax payments in each quarter are 25% or more of your previous year's tax liability. Here's the section that I am basing this on: http://www.irs.gov/publications/p505/ch04.html Minimum required each period.   You will owe a penalty for any 2011 payment period for which your estimated tax payment plus your withholding for the period and overpayments for previous periods was less than the smaller of: 22.5% of your 2011 tax, or 25% of your 2010 tax. (Your 2010 tax return must cover a 12-month period.) Solution 2 Use the ""Annualized Income Installment Method"". This is not a method for calculating estimated taxes, per se. It's actually a method for reducing or eliminating your underpayment penalty. It's also intended to assist tax payers with unpredictable incomes. If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Emphasis added. In order to take advantage of this, you'll need to send in a Schedule AI at the end of the year along with a Form 2210. The downside to this is that you're basically racking up underpayment penalties throughout the year, then at the end of the year you're asking the IRS to rescind your penalty. The other risk is that you still pay estimated taxes on your Q2 - Q4 earnings in Q1, you just pay much less than 25%. So if you have a windfall later in the year, I think you could get burned on your Q1 underpayment." The W4 specifies withholding for income taxes, FICA taxes are not impacted. The tax withholding is do that you do not need to make estimated tax payments. Failing to make sufficient quarterly estimated tax payments or withholding a sufficient amount could result in you being hit with under payment penalties but nothing more. The under payment penalties will be figured out as part of you income tax return.  What you should have done when you discovered this was use the extra withholding line on the W4 to further increase your withholding. The nice thing about withholding is that you back load it and the IRS does not care.  The company has no liability here. It is your responsibility to update them when your personal circumstances change. You will be fully responsible for the tax bill.  There is no company paid portion of your income tax so they are not impacted. The company only pays an employer share of FICA and that is not impacted by how you fill out the W4. First thing to do is figure out how much you owe the IRS. Then determine if you can pay it or if you need to investigate an installment option. In any case make sure to file your return on time. "The answer is simple -- your new job pays more than your old one.  As such, you're in a higher tax withholding bracket, even with the same number of deductions as before. Your withholding is computed based on how much you make each pay period, and the number of pay periods in the year.  So, if you were being paid weekly before then it was based on the assumption you made the same amount for every pay period in the calendar year.  This is why tax varies from week to week for hourly employees and people being paid overtime.  In your new job, you're being paid ""semi-monthly"", which makes for 24 pay periods rather than the 52 pay periods when you were paid weekly, so the amount of withholding (in dollar terms) is going to be much greater than when you were being paid weekly.  Add in the fact you're making $2,000 more (a month, I presume?), so that's $24,000 a year more.  It's definitely going to bump you into a different earning bracket for taxes, so even with the same number of deductions, you're going to pay more now. This isn't to say you won't be able to recoup some of that at the end of the year when you file your taxes, since your current withholding rate may have you over-paying.  As such, you'll see a nice refund. One final note -- You always have the option of changing your withholding if you like.  Many people will do that, claiming minimal deductions for the first few months of the year to let the maximum withholding take place, then they'll adjust their withholding deductions in the second half of the year to capture more in each paycheck.  If done right, it makes no difference in the total amount withheld, but it does allow the checks at the latter part of the year to be bigger than if withholding deductions were kept the same throughout." "I would suggest you pay quarterly. Or, if you prefer, do the extra withholding. Don't wait until the end of the year. My experience is that of having a day job with freelance work on the side. I've spent a few years just freelancing, and I paid quarterly as requested to avoid the penalties. Now that I have a good day job again, my freelancing is just a small part of my income, and so I end up with a net return and no longer have to pay quarterly. You shouldn't wait until the end of the year to pay. This is assuming your wife is bringing in a decent income. The only scenario where you would want to wait is if her income is only a small amount (such as my wife's plans for an Etsy store). To the IRS, it doesn't really make a difference whether you withhold extra or pay quarterly. Of those two choices, my preference is to pay quarterly - it's easy to set up calendar reminders on the quarterly payment dates, which are always the same. I did the same as bstpierre when estimating my payments: just take last year's tax (for the business) and divide by 4 (adjusting for any obvious situational differences). That's usually close enough. Paying quarterly instead of via withholding means you get to hold on to your money (on average) for 6 weeks longer. Granted, that doesn't mean much with today's interest rates, but it's something. You may prefer the simpler accounting for withholding, though - you can ""set and forget""."