W-4 Form: Extra Withholding, Exemptions, and Other Things Workers Need to Know
Knowing how the IRS Form W-4 form works can help with new jobs, tax refunds, and avoiding estimated tax payments.
When you start a new job, your employer will ask you to complete a W-4 form. This form requires you to provide information such as your expected filing status, family income from other jobs, number of dependents, and tax deductions you plan to claim. The IRS W-4 helps determine the correct amount of income tax your employer will withhold from your wages.
You can also use the W-4 if you have a side hustle and want to avoid estimated tax payments or if you receive any other non-wage income throughout the year. Additionally, you can use the W-4 form to adjust your tax refund for the following year.
So, it is important to fill out the W-4 form correctly. To help, here are ten things you need to know.
1. You don’t have to fill out a W-4 form each year
You are not required to file a W-4 form with your employer each year. If you are happy with your current tax withholding, you can leave your current Form W-4 in effect with your employer.
- However, you must complete a W-4 form to start a new job. That is the only way your new employer will know how much federal income tax to withhold from your wages.
- 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 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 tax refund means you gave the IRS an interest-free loan.)
If your tax withholding is off track, submitting a new W-4 can help. That is especially important if you have a significant change in your life, such as getting married, having a child, or buying a home.
2. The W-4 form is relatively easy if your taxes are simple
The W-4 form can be relatively easy if you only have one job, and your taxes are simple. (Simple means you are 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 all those are true, you only have to provide your name, address, Social Security number, and filing status, and then sign and date the W-4 form. Your employer will compute your tax withholding based on the standard deduction and income tax rates for your filing status, with no other adjustments.
3. The W-4 form could take 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.
For example, when new hires fill out a W-4 form, they may need to look up information from their last tax return to get Information about total deductions from the previous tax year, the child tax credit, and how much non-wage income they reported.
4. Multiple jobs and working spouses require more information
Having multiple jobs or a working spouse can affect the 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.
- Note: 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.)
5. Line 4b on W4: You can account for tax credits and deductions
The W-4 form allows you to adjust your withholding to account for certain tax credits and deductions. There are lines on the W-4 form to add these amounts. Including tax deductions and credits on the form will decrease the amount of tax withheld, increase the amount of your paycheck, and reduce 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, such as education credits or foreign tax credits.
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. It should be the form for the highest-paying job to get the most accurate withholding.
6. The IRS has an online tool to help you complete a W-4 form
To get the most accurate withholding, use the IRS's Tax Withholding Estimator to help you fill out the W-4 form. You will also want to use this tool if you expect to work only part of the year, have dividend income or capital gains subject to additional taxes (e.g., the additional Medicare tax), or have self-employment income.
You will 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 federal income tax return handy. You will 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.
7. 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.
8. You can set up extra withholding for a side job
Suppose you have a side job as an independent contractor (i.e., not an "employee"). In that case, you can use the W-4 form to have extra taxes withheld from your regular job's paycheck to cover your side job, too (Instead of making estimated tax payments for your second job.)
- Use the IRS's Tax Withholding Estimator tool. You can also pay self-employment taxes through withholding from your regular job wages.
- However, don't include self-employment income as "other income" on Line 4(a). That line is only for income, not from a job.
9. You can claim a withholding exemption
You can claim an exemption from withholding on a W-4 form. There isn't a particular line for this on the form, but you can claim an exemption by writing "Exempt" in the space below Line 4(c) if you qualify. You must also 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 no federal income tax liability in 2024. (If your total expected income for next year is less than the standard deduction amount for your filing status, then you satisfy the second requirement.)
Note: If you claim an exemption, you will not have income tax withheld from your paycheck, and you may owe taxes when you file your return. You might be hit with an underpayment penalty. However, an exemption is also good for only one year, so you must reclaim it yearly.
10. Extra withholding can increase your tax refund
You can adjust your W-4 form to generate a larger tax refund (or refund in general) if you wish. Although the tax withholding system aims to produce the most accurate withholding, you can add an extra amount on Line 4(c) for "extra withholding" to increase your income tax withholding and reduce your paycheck. That will either increase your tax refund or decrease any tax you owe when you file your tax return.
If you have a specific refund amount, 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).
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
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.
- Katelyn WashingtonFormer Tax Writer
-
Come as You Are: Wealth Management for Gen X
Gen X is stuck in the middle of kids and aging parents, but retirement's not far off. Time to prioritize, with help from Nirvana, The Eagles and David Bowie.
By Alvina Lo Published
-
New Job? Time to Start a 401(k) Plan
Whether you're starting a new job or have never opened a 401(k) account, it's time! Here's how to open an account in five steps.
By Adam Shell Published
-
Six Tax Deadlines for October 15
Tax Deadlines You might know about the federal tax return extension deadline, but did you know about these other tax deadlines for Oct. 15?
By Kate Schubel Published
-
IRS Sued for Millions Over Employee Retention Credit (ERC) Delays
Tax Credits The pandemic-era tax refunds for businesses have been a contention point for the agency, now employers are fighting for their cash.
By Gabriella Cruz-Martínez Published
-
Hurricane Helene Aftermath: IRS Tax Relief and How to Help
Tax Relief Following the destruction in the southeast U.S., IRS officials and several states have extended tax deadlines for affected taxpayers. Here are the payments and filings that qualify.
By Kate Schubel Last updated
-
New Jersey Ends Sales Tax Break for EVs: What to Know
State Tax Discover alternative savings now that New Jersey is phasing out its sales tax exemption on EVs.
By Kate Schubel Last updated
-
Landmark Lawsuit Targets Unfair NYC Property Taxes
Property Tax New York’s highest court just weighed in on the city’s embattled property tax code. Here's what it could mean for you.
By Gabriella Cruz-Martínez Last updated
-
IRS Solar Tax Credit Payouts Soar as Scams Target Homeowners
Clean Energy Clean energy tax credits are paying off for many, but experts warn of increasing scams.
By Kelley R. Taylor Last updated
-
Arizona Pickleball Taxes? What You Need to Know
State Tax The popular sport is sparking debate in some communities. Could you be subject to ‘pickleball taxes’?
By Kate Schubel Last updated
-
Capital Gains in Retirement: Managing RMDs, Taxes, Social Security and Medicare
Capital Gains Capital gains tax can significantly impact your funds and financial planning for retirement.
By Kelley R. Taylor Last updated