The W-4 form is used by new employees to provide their employer with the information needed to determine how much income tax should be withheld from their wages. That's the basic purpose of the W-4 form. And while simple in principle, it's important to get your paycheck withholding correct. Otherwise, you may be in for a big surprise when you file your next tax return.
But the IRS's W-4 form can be used for other reasons, too. For instance, if you have a side hustle and don't want to be bothered with estimated tax payments, then you can sign up for extra withholding using the W-4 form. Ditto if you receive other non-wage income during the year. You can also use the W-4 form to tweak the next year's tax refund.
When filling out a W-4 form, you'll be asked to include things like your expected filing status, family income from other jobs, number of dependents, and tax deductions you plan to claim. (Some employers offer electronic versions of the form.) Once your employer has the necessary information, the company will take it from there and do the necessary calculations. But to help make sure you get it right, here are 10 things every worker needs to know about the W-4 form. Take a look so you can tackle your next W-4 form with confidence.
You don't need to submit a W-4 form every year
You aren't required to file a W-4 form with your employer every year — but you might want to anyway. If you're happy with your current tax withholding, then do nothing and leave your current Form W-4 in effect with your employer. You're not required to periodically submit a new W-4 form.
However, if you start a new job, you're required to complete a W-4 form at that time. That's the only way your new employer will know how much federal income tax to withhold from your wages. There's no way around that requirement.
You also must file a new W-4 form if you want to adjust the amount of tax your current employer withholds from your paycheck. Ideally, you want your annual withholding and your tax liability for the year to be close, so that you don't owe a lot or get back a lot when you file your return. (Remember, a large refund just means you gave the IRS an interest-free loan.) We recommend an annual check using the IRS's Tax Withholding Estimator to make sure you're on track as far as your withholding goes (the earlier in the year the better). If your tax withholding is off kilter, go ahead and submit a new W-4 as soon as possible. This is especially important if you have a major change in your life, such as getting married, having a child, or buying a home.
The W-4 form is really easy if your taxes are simple
The W-4 form is super simple if you only have one job and your taxes are easy. (By "easy," we mean you're not filing a joint return with a spouse who works, you don't have dependents, you're not itemizing or claiming deductions other than the standard deduction, you're not claiming tax credits, and you don't have non-employment income.) If that's you, all you have to do is provide your name, address, Social Security number and filing status, and then sign and date the form. That's it — you're done! Your employer will compute your tax withholding based on the standard deduction and tax rates for your filing status, with no other adjustments.
The W-4 form takes longer if your taxes are complex
If your taxes are more complicated, it will probably take you more time to complete a W-4 form.
When new hires are handed a W-4, they may need to look up information from their last tax return. They'll need to know what their total deductions were last year, if they still qualify for the child tax credit, how much non-wage income they reported on their last return, and similar tax-related things. You might need to take the form home and fill it out there, instead of turning it in right away on your first day of work.
Multiple jobs and working spouses require more information
Having multiple jobs or a spouse who works can affect the amount of tax withheld from your wages. Tax rates increase as income rises, and only one standard deduction can be claimed on each tax return, regardless of the number of jobs. As a result, if you have more than one job at a time or file a joint return with a working spouse, more money should usually be withheld from the combined pay for all the jobs than would be withheld if each job was considered by itself. Therefore, adjustments to your withholding must be made to avoid owing additional tax, and maybe penalties, when you file your tax return.
Fortunately, the W-4 form has a section where you can provide information about additional jobs and working spouses so that your withholding can be adjusted accordingly. Step 2 of the form actually lists three different options you can choose from to make the necessary adjustments. Also note that the IRS recommends completing a W-4 for all your jobs to get the most accurate withholding. (By accurate, the agency means having total withholding as close to your expected tax liability as possible.)
It's easy to account for tax credits and deductions
The W-4 form makes it easy to adjust your withholding to account for certain tax credits and deductions. There are clear lines on the W-4 form to add these amounts — you can't miss them. Including credits and deductions on the form will decrease the amount of tax withheld, which in turn increases the amount of your paycheck and reduces any refund you may get when you file your tax return.
Workers can factor in the child tax credit and the credit for other dependents in Step 3 of the form. You can also include estimates for other tax credits in Step 3, such as education tax credits or the foreign tax credit.
For deductions, it's important to note that you should only enter deductions other than the basic standard deduction on Line 4(b). So, you can include itemized deductions on this line. If you take the standard deduction, you can also include other deductions, such as those for student loan interest and IRAs.
If you have multiple jobs or a working spouse, complete Step 3 and Line 4(b) on only one W-4 form. To get the most accurate withholding, it should be the form for the highest paying job.
The IRS has an online tool to help you complete a W-4 form
The get the most accurate withholding, use the IRS's Tax Withholding Estimator to help you fill out the W-4 form. You'll also want to use this tool if you expect to work only part of the year, have dividend income or capital gains that are subject to additional taxes (e.g., the additional Medicare tax), or have self-employment income.
You'll want a few things by your side before you start using the tool — you'll need them as a source of information. For example, have your most recent income tax return handy. You'll also need your most recent pay stub (your spouse's, too, if you're married). Collect information for other sources of income as well, such as invoices, statements and 1099 forms.
You can set up extra withholding for non-wage income
If you receive taxable income that isn't from wages — like interest, dividends or distributions from a traditional IRA — you can have your employer withhold tax from your paycheck to cover the extra taxes. Just put the estimated total amount of this income for the year on Line 4(a) of your W-4 form and your employer will calculate the proper withholding amount for each pay period.
Don't include income from a side gig on Line 4(a). Keep reading for information on how to get your boss to withhold taxes from your regular paycheck for self-employment income.
You can set up extra withholding for a side job, too
If you have a side job as an independent contractor (i.e., not an "employee"), you can use the W-4 form to have extra taxes withheld from your regular job's paycheck to cover your side job, too. (This would be instead of making estimated tax payments for your second job.) You'll definitely want to use the IRS's Tax Withholding Estimator tool for this. You can also pay self-employment taxes through withholding from your regular-job wages.
Don't include self-employment income as "other income" on Line 4(a), though. That line is only for income that isn't from a job (see above).
You can claim a withholding exemption
You can claim an exemption from withholding on a W-4 form. There isn't a special line for this on the form, but you can claim it by writing "Exempt" in the space below Line 4(c) if you qualify. You also have to provide your name, address, Social Security number and signature. Looking ahead to next year, you qualify for an exemption in 2024 if (1) you had no federal income tax liability in 2023, and (2) you expect to have no federal income tax liability in 2024. (If your total expected income for next year is less than the 2024 standard deduction amount for your filing status, then you satisfy the second requirement.)
Be warned, though, that if you claim an exemption, you'll have no income tax withheld from your paycheck and you may owe taxes when you file your return. You might be hit with an underpayment penalty, too.
An exemption is also good for only one year — so you have to reclaim it each year.
Extra withholding can increase your tax refund
Although the tax withholding system is designed to produce the most accurate withholding possible (i.e., low tax payment or refund when you file your return), you can tweak your W-4 form to generate a refund (or larger refund) if that's what you really want. Simply add an additional amount on Line 4(c) for "extra withholding." That will increase your income tax withholding, reduce the amount of your paycheck and either jack up your refund or reduce any amount of tax you owe when you file your tax return.
If you have a specific refund amount in mind, let the IRS's Tax Withholding Estimator tell you how much to put down on Line 4(c). You can even download a W-4 form with the appropriate amount preloaded on Line 4(c).
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
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