If you’ve recently gotten a new job, you’ve likely come across an IRS Form W-4. A W-4 is one of many tax forms that helps the government assess tax liabilities to taxpayers.
Tax forms can be difficult to fully comprehend, even for the most seasoned business owners. If you want to understand your taxes better and learn how to fill out a federal W-4, keep reading for a comprehensive explanation.
A W-4 is a tax form that an employee completes and returns to their employer to indicate how much tax to hold back (or withhold) from each paycheck. The official title of a W-4 is Employee’s Withholding Certificate, though you might recognize it as a federal withholding form. Employers use the W-4 to help determine payroll taxes and to withhold taxes for both the IRS and state (if income taxes are applicable) on behalf of their workers.
For most taxpayers, the key to filling out your W-4 is choosing the right withholding amount that’s about even with the taxes you actually owe or withholding slightly more of your paycheck so you can get a moderate tax refund. Of course, if you choose to withhold more than truly necessary, you’ll be living on slightly less during the tax year.
You need to pay your income tax on earnings when you earn it, which is why it’s imperative to fill out your W-4 properly when you go through a life change that impacts your taxes—for example, getting a new job or getting married.
Although tax forms can look daunting, Form W-4 includes some straightforward components that you should already have available. These elements include your:
You’ll also need to provide information such as any additional amount of money you want to be withheld from your paycheck or if you’re exempt from making tax payments.
Although you only need to fill out the first page of the W-4, there are other pages included with the form to help you determine your calculations:
We’ve covered how to fill out a W-4 above, but it’s perfectly natural to still have some questions about the intricacies of this particular tax form. Keep reading to have some of the most common questions about the W-4 answered.
Simply put, tax Form W-4 informs employers how much to withhold from your paychecks for federal taxes.
A W-4 is typically provided to you when you start new employment by the human resources team during your onboarding process. They should also be able to provide you with a new form if you need to make changes throughout your employment.
There are a few different reasons why you may want to fill out a new W-4 tax form. Here’s a list of questions you can use to determine if you should change your withholdings on your W-4 form:
If you answered yes to any of the questions above, it’s a good idea to revisit your W-4 and figure out your new income tax withholdings. All of these types of life changes can affect the amount of taxes you owe. In some cases, you’ll owe additional taxes, and in other cases, you might owe less.
Previously, employees could elect to claim allowances to lower the amount withheld from their wages. Essentially, the more allowances an employee claimed, the less money was withheld, making their regular paychecks higher. However, this sometimes created issues down the road, causing the employee to pay additional taxes at the end of the tax year.
In 2020, a new W-4 form was introduced to alleviate any confusion and underpaying that the previous form provided. This change was due to the 2017 Tax Cuts and Jobs Act. On the new form, employees who want to lower their tax withholding must claim dependents or use a deductions worksheet.
The W-4 does not need to be filled out yearly. However, if you have a change in circumstances that affects how much money should be withheld from your paycheck, completing a new W-4 is advised.
A frequently asked question about the W-4 is if you should claim 0 or 1. The difference between claiming 0 or 1 determines whether you’ll get more money in each paycheck or in a larger lump sum during tax season. Claiming 0 will take out more taxes per paycheck, and claiming 1 will take out less taxes per paycheck, giving you more money each month rather than at the end of tax season.
A W-4 form can seem intimidating at first due to the vast amount of information that’s included. We’ve listed out step-by-step instructions below to help you navigate through the form.
This is where you’ll input your full name, address, and Social Security number. To be most accurate, make sure this matches the information that you’ve provided your human resources department so that there’s no filing confusion.
If you have more than one job or you have a working spouse and you’ll be filing jointly, you’ll have three options to choose from. These are:
This only applies if you personally hold more than one job, or if you are married filing jointly and have a spouse who also works.
This is where you’ll claim dependents per the instructions listed on the sheet. Keep in mind that this is only applicable if your total income will be $200,000 or less ($400,000 or less if married filing jointly).
In this section of the form, the IRS asks if you want to withhold additional income from your paycheck. This can be due to other income sources not from jobs, deductions, and general extra withholding. Remember that this section is optional.
This is the last step you’ll need to take. Your signature tells the IRS that you’ve filled out your W-4 as thoroughly and accurately as possible.
W-4s are an important piece of the tax puzzle. Tax forms, including learning how to fill out a W-4, can seem overwhelming at first. But by staying organized, knowledgeable, and using this article as a guide, you can ensure that your taxes won’t be as daunting in 2022.
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