When you accept a new job and report to work the first day, one of your first tasks will be filling out a Form W-4. All U.S. employees need to fill out a W-4. Your employer uses the information to calculate how much in federal income tax to withhold on your behalf, so it’s important to know ahead of time how to fill the form out properly. Here’s everything you need to know to fill one out:
Table of Contents
What Is a W-4 Form?
A W-4 form is an IRS form designed to help your employer know how much money they should withhold from your pay to cover your federal income taxes. The form is organized into four sections:
- Personal information including name, address, and Social Security number;
- Information about other jobs;
- Number of dependents (children or person you’re financially responsible for, not your spouse or partner);
- An optional section for other adjustments;
- Signature area.
The Purpose of W-4 Forms
All employees must fill out a W-4 and provide it to their employer for calculation of the amount of federal withholding. Employers are required by law to deduct taxes from an employee’s paycheck and deposit the amount with the IRS on the employee’s behalf.
The IRS prefers to collect tax on your income before you’re paid instead of waiting to collect it the following year. Although this may seem unfair to you, the tax withholding does you a big favor. It’s easier to pay small increments of the taxes you’ll owe from your paycheck than to stress over a large tax bill once per year.
The hardest part of filling out the form is the number of allowances you claim. Luckily, the newly updated W-4 gives you the option of adding extra steps for a more accurate withholding amount. Employees with more complicated work and family situations will find the changes helpful.
Getting the number right is tricky — claim too many allowances, and your boss may not deduct enough to cover your income taxes. Your paycheck will be bigger, but it could leave you with a larger tax bill than you expected when you file a tax return.
If you don’t claim enough allowances, your paycheck would be smaller as your employer withholds more, causing you to prepay more than you’ll owe in taxes. Don’t worry — you’ll get back the overages in the form of a tax refund when you file your taxes, but why let the federal government hang on to your money for a year, interest-free?
The goal of finding the right withholding amount is to not owe any money or overpay on your income tax. You may use the IRS’s tax withholding estimator tool or page three of the W-4 instructions to calculate your deductions. Or consult with your account or tax professional for advice.
Steps to Complete a W-4 Form
The W-4 doesn’t take much time to fill out. It’s only one page long and was recently redesigned for 2020 to be faster and easier to fill out than ever. Every step is numbered to guide you and includes instructions. You may fill out the form manually using a printed form and a pen or complete the form digitally from your computer. Follow these steps to complete your W-4:
1. Fill Out the Information Section
Fill in your name, address, Social Security number, and marital status in step one of the form.
2. Fill Out the Worksheets
Page three of the W-4 form includes a worksheet to make multiple job calculations and figure out your deductions. You’ll need the information from this section to complete steps two and three. Once you complete the worksheet, enter the amounts you need.
If you have more than one job or are married and filing jointly with your working spouse, follow the instructions on step two. If your filing status is single and you only have one job, skip this section.
In step three, enter the number of dependents you’d like to claim. Step four is optional and is reserved for other adjustments, such as additional non-work income. You can also set a dollar amount for additional deductions.
3. Sign and Date Your W-4
Once you’ve completed all your information and filled out any relevant worksheets, sign and date the form, swearing the information you provided is true and complete. A W-4 is not valid until you sign it. Turn it in to your boss and let them take it from there.
How Often Do You Have to Fill Out a W-4 Form?
If you stay with your current employer, you only have to fill out the W-4 form once. There is no requirement to update the form or fill out a new one, even if the IRS redesigns it as they did for 2020. You’ll need to fill out a W-4 form every time you change jobs or get an additional one.
There are times when you should fill out a new W-4, even if you’re still working with the same employer. They usually revolve around major life changes and include:
- A change in your marital status from single to married, or married to divorced, or widowed;
- A new baby;
- A non-working parent moves in and becomes your dependent for tax purposes;
- A change of address;
- Changes to your tax filing status from single to married filing jointly or vice versa;
- If you picked up a second side job or lost it;
- If your spouse starts working and you file taxes jointly or if your spouse loses his or her job;
- If you’d like to adjust your withholding amount.
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