<prompt> Human: So Im 24 and have been out of school two years now. My parents have told to me claim 0 on my W4 in the past which makes sense to me.Im single, living on my own and recently started a small business that generates only a couple hundred in profit each month so nothing major. I make 60,000k a year. I have about 23k in student loans left, but thats it in terms of debt.Ive been used to claiming 0 and getting a refund. Im confused on choosing between 0, 1, or 2 now and if me running a small business plays into that decision.Also, Ive used a withholding calculator but Im not really good with money lingo so I got lost and confused. Claiming 0, they take out the most taxes of my current paychecks which is why I get a refund. If I claim 1 or 2, Ill have larger paychecks technically but not the biggest return or may owe money, correct?Assistant: Getting a refund not return...a return is what you file is not ideal. That just means you had too much withheld.People who take the standard deduction, are single, independent, with one job, and no dependents can typically put down 2.In your case because of the extra income from the side business, Id probably put down 1 for now and wait for the w-4 calculator to come back up.I know you said you tried calculators in the past, but the thing to do IMO would be to ask for help in filling it out and also ask if the result seems sane.Human: How come I should choose a 1 over 2 because of the side business? I was reading something online and I thought it said to go for 2 if I have more than one job.And then does claiming 1 or 2 increase my take home pay then bi-weekly, compared to 0?  <response>: I was reading something online and I thought it said to go for 2 if I have more than one job.That is quite wrong. Dont trust that source.When you have more than one W-2 job it very often is the case that you underwithhold, because the withholding systems dont know about each other and treat your income as if it falls into tax brackets twice as big as they really are, which takes less tax than actually necessary.2 allowances is the way to convey that you will have 12000 of nontaxable income, which is likely the case if you are single using standard deduction.non taxed 3700 4150 allowancesThe above formula is how the withholding system will judge how much of your annual income at W-2 job it should figure is not taxed.---Your side gig generates tax liability -- both income tax and Social Security and Medicare taxes. You can handle this by making 4 estimated tax payments during the year. See Form 1040-ES booklet.However, some people find that instead of doing estimated tax payments, they prefer to just increase amount taken from paychecks to account for the extra tax burden. You are totally welcome to do that, and would still benefit from working through Form 1040-ES worksheet to know how much extra withholding to send in.One way to use your W-4 at work to send in extra withholding is to fill out a new W-4 with 2 allowances on line 5, but then a specific per-paycheck amount of extra on line 6, so that amount will also get sent as withholding.The suggestion to use 1 instead of 2 is a plausible idea as well, as it sends in a little more withholding. To be precise, it acts as if 4150 more of your income is taxable by treating 4150 less of your income as non taxable. If you are in the 22 tax bracket, that would mean 22 4150 913 more in taxes paid than otherwise.Would that be enough extra?You can predict!200 profitmonth 12 months 2400 profitSuppose 0 in deductible business expenses.Schedule SE for Social Security and Medicare taxes says: 2400 0.9235 0.153 340Half your SE taxes is a line 27 deduction 170Income tax on 2400 170 at 22 tax rate is 491.Your additional tax from the self employment gig is 491 income tax plus 340 SE taxes, so 831. That suggests that if your withholding of 1 takes appropriate amount out for W-2 job and 913 extra, you are good. You would not have to do 4 estimated tax payments if you instead choose to be paying in those 831 dollars by increasing your withholding using 1 instead of 2.If your SE business takes off beyond expectation, you can make more changes to W-4, or you can send in estimated tax payments of varying size.At tax time when final income and final business profit are known, you list W-2 withholding on 1040 line 64 and all estimated tax payments on line 65. You then see if you overpaid and get a refund or you underpaid and owe.---Here endeth the lesson. 