Single Taxpayers

• A consumer filing his taxes as a single taxpayer usually claims himself as a dependent unless a parent or guardian can claim him as a dependent. According to the IRS, a dependent for tax purposes is either a child under the age of 19 if not attending school full-time or under the age of 24 if attending school full-time. The dependent must be responsible for less than 50 percent of living expenses, live with the primary taxpayer at least half the year and be related to the primary taxpayer through blood or adoption. A dependent taxpayer claims zero allowances on his Form W-4 and federal return.
  
  

Taxpayers With Dependents

• A taxpayer claiming dependent children is able to claim more allowances on her federal tax return than a single taxpayer without any dependents. For example, a taxpayer with three dependent children can claim herself as a dependent plus her three children, enabling her to claim up to four allowances on her federal return. This significantly lowers her expected tax obligations, making it more likely she secures a refund at the end of the year.
  
  

Claiming too Many Allowances

• Claiming too many allowances can hurt a taxpayer at the end of the year at tax-filing time. This is because the federal government taxes the worker by the number of allowances he claims on the Form W-4 submitted to the IRS by his employer. The more allowances he claims, the less taxes he pays during the year. If the employee doesn't have sufficient tax deductions or credits to reduce his income and tax liability, he may end up owing the IRS a significant sum because of his reduced taxation.
  
  

Military Pay Allowances

• Members of the armed services are able to claim tax exemptions for military pay allowances outside of basic pay. The IRS taxes basic pay normally but exempts members of the military from taxation for housing and subsistence allowances. This means members of the military do not have to claim money received from the armed services to pay rent or make utility payments as well as buy the necessities of life, including food and clothing.