The W-4 sets withholding, not the tax
The tax you owe is decided by the brackets at filing. The W-4 only shapes the prepayment: roughly how much of every paycheck goes to the IRS before the year is settled. The two numbers rarely meet exactly, and the gap is the refund or the balance. Since the 2020 redesign the form is a set of steps - filing status, multiple jobs, dependents and credits, other adjustments, then a signature - instead of the old numbered allowances, so the advice to "claim 2" no longer means anything.
One property of this page is worth stating before you read its answer. The withholding line is the site estimate of the annual federal tax on your wages, after pre-tax deductions and the standard deduction, plus any step 4(c) amount you enter - not the IRS percentage-method withholding tables. Because the same tax sits on both sides, a year with no credits, no step 4(b) deductions, no extra withholding and no unwithheld income projects exactly $0. The gap the page prints is produced by those four items, not by the employer checkbox arithmetic.
The quiet cause of a balance: income with no W-2
Withholding only happens on a W-2 wage. Interest, dividends, capital gains, prize money and 1099 side income pass through no paycheck, so nothing is held out for them until the return is filed. That is why a paycheck that looks perfectly withheld can still end in a bill, and why the first example on the page - $75,000 of wages and $2,000 of other income - projects a balance of $440 at a 22% marginal rate.
The other income is taxed at your marginal rate from its first dollar, with no standard deduction carved out of it first. When wages already exceed the standard deduction that is exactly how a return works, because your deduction is used up by the salary. When wages are low enough that the deduction is not exhausted, the page will overstate this piece - which is the case where a real return lands better than the estimate, not worse.
Step 3 credits and step 4(b) deductions
Dependent credits - the child tax credit is $2,000 a qualifying child - come off the tax dollar for dollar. The deductions on step 4(b) are different: they lower the income the tax is worked out on, so $1,000 of them saves $1,000 times your marginal rate, which is $220 at 22% rather than $1,000. That is why a step 4(b) entry has to be roughly five times a credit to move the bill by the same amount, and why the page keeps the two inputs apart.
The order is fixed: the deduction reduces the bill first, then the credit is applied to what is left, and neither can push the tax below zero. If your step 3 credits exceed the bill, a warning names the unused amount and says plainly that it does not become a refund here, because most credits that outrun the tax are non-refundable. Step 4(c) runs the other way, adding a fixed amount to each paycheck - 52, 26, 24 or 12 times a year depending on how often you are paid.
The break-even target and when to revisit it
Nothing is gained by a large refund except forcing yourself to save, and nothing is gained by a large balance except a bill. The target is near zero: enough withheld to avoid the underpayment penalty, not so much that the money never reaches your account. The break-even table divides the same annual gap four ways, because 52 weekly paychecks and 12 monthly ones cannot absorb the same annual gap with the same per-check figure. A positive figure means adding that amount on step 4(c); a negative one means removing withholding so the extra lands in your paycheck.
The result note changes with the size of the answer: a projected balance of $1,000 or more brings in the underpayment penalty, a refund above $3,000 is described as money over-withheld by roughly that much a month, and anything in between is called close enough to leave alone. Revisit the form whenever income changes - a new job, a raise, a second job, a child, a big year for interest or side income. Filing status here covers single, married filing jointly and head of household. Filers with a second job enter its wages and its own withholding in two extra fields, and the page adds both jobs together with one standard deduction and one bracket ladder; only a separate return (married filing separately) and dependent ages sit outside the model.
Danfio