said by GVel :
My confusion lays in that when you add that all up, wouldn't you still get a 1 since the first line is 'enter 1 for yourself...?
Yes, but you do not have to. In other words it is not required that you claim yourself, or anyone else, when filling in your W4 forms.
The instructions for the W4 form are designed to guide you to claim dependency based on certain criteria. So for example if you are single but have two children to feed, claiming 2 or 3 will result in less tax being taken out of your paycheck giving you more dollars to work with each pay period. Claiming zero will result in the most amount of tax being withheld each paycheck.
Either way is sort of up to you. The instructions are a guideline.
What really matters is when you complete your 1040 tax form each year.
You will need to be accurate here when claiming dependents. This is where you are telling the IRS how many dependents you actually, truthfully have. You don't want to misrepresent here.
The more dependents you can claim, the less your tax liability will be.
So if throughout the year you claimed zero dependents (most tax withheld) and then at 1040 time you report 3 dependents (least tax required of you) then typically this will result in a large refund.
If throughout the year you claimed 3 dependents and then also on your 1040 you claim 3 dependents you will have a very small refund if any at all.
The W4 instructions are intended to get you to the point of a zero refund/owe tax return each year. What the instructions don't really account for are circumstances that also play into how much tax you owe each year such as credits like Earned Income or child tax credits. When these are applied to you 1040 tax form it reduces how much tax you owe. So then it ultimately plays into your refund/owe status.