I max out my 403b and 457 contributions by about mid-year.
If claim the number of exemptions I get by following the instructions on Form W-4http://www.irs.gov/pub/irs-pdf/fw4.pdf
(2 page PDF)
then too much federal tax is withheld over the year, and I get an unnecessarily large refund.
This is because the taxable income is uneven (due to uneven retirement contributions), and for each paycheck tax is withheld as if you'll be getting that same paycheck every pay period (making it look like you're in a higher tax bracket sometimes, even though you're not).
Must I claim the number of exemptions I get by following the instructions on Form W-4.
Or can I claim as many exemptions as I want on Form W-4, and it's on me to make sure I have enough withheld?
Or is it something in between (e.g. I'm not supposed to claim more exemptions, but it'll be okay if I do, as long as I have enough withheld)?