The DE-4 is similar to a federal W4. it is a form telling your employer just how much to withhold from each check. Generally i keep my allowance at 0 because I wish to ensure that I have enough withheld from my check so I don't owe money when it is time to file my tax return. Most people my claim 1 allowance and hope that enough tax is withheld to withstand any tax liability owed at the end of the year.
Also you may be eligible for an exemption if you meet two conditions according to this State of California form.
- You did not owe any federal/state income tax last year, and
- You do not expect to owe any federal/state income tax this year. The exemption is good for one year as a new DE 4 designating EXEMPT must be submitted by February 15 each year to continue your exemption.
If you are not sure of your status this year, I would not recommend checking the boxes regarding the exemptions on your DE-4 form. Leave those blank if you aren't sure.
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