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W-4 form

Form W-4, officially titled Employee’s Withholding Allowance Certificate, is a common and very important tax form. It helps your employer know how much federal income tax to withhold from your paychecks. That means the information you put on your W-4 directly impacts the size of your paychecks. The following guide will take you step by step through the process of filling out your W-4.

Form W-4: The Basics

W-4 forms aren’t as scary as they may look. Employees complete this form so that their employers know how much federal income tax to withhold from their paychecks. In fact, this form directly affects how much money you will take home with each paycheck. That’s why you will have to submit a W-4 every time you start a new job. You can also turn in a new form if your filing status or financial situation changes. Changes could be due to something like a divorce or the birth of a child.

To understand how the W-4 works, you need to understand withholding. Withholding involves having a portion of your earnings taken from your pay and sent to the government. This money goes toward paying your annual tax bill. Even if you’re not working, you may have taxes withheld from other sources of income such as pensions, annuities, commissions and other awards.

When you submit a W-4, you can expect the information to go into effect fairly quickly. Your employer must update your information by the beginning of the pay period that ends 30 or more days after you hand in the form.

If you forget to give your employer your W-4, the IRS will treat your income like you’re a single person with zero withholding allowances. That’s the highest possible withholding rate. This could be a real problem if you need more take-home pay to cover big expenses like buying a new house.

Adding Up Your Allowances

Before you can fill out a W-4 form, you should complete the personal allowances worksheet. This will help you figure out how many allowances you’re going to claim. As the number of your allowances increases, the amount of money withheld from your paycheck decreases. The worksheet isn’t technically necessary – it’s just to help you fill out the form itself, and you don’t have to submit it to your employer. But it’s good to work through the worksheet so you understand exactly what you’re putting on the form.

You’ll enter numbers in lines A – G based on your unique situation, so it’s a good idea to pay close attention to the Form W-4 instructions. This part of the form may take more time to finish if you are claiming a dependent and/or are married.

For the sake of ease, if you’re single and you have one job, you’ll enter a “1” for line A and a “1” for line D of the worksheet. If you file as head of household, if you have dependents or if you have low income, you may qualify for some of the allowances on other lines. When you’re done, write the sum of your allowances on line H. For some people, that’s the extent of the work you need to do on the worksheet; you can return to the form itself and enter the number from line H into box 5.

Deductions and Adjustments

If you have any deductions or income adjustments to make, move on to the next section of the worksheet.

On the deductions and adjustments worksheet, you’ll need to do some math as you estimate your adjustments and add up your deductions (for instance, for giving to charity or paying interest on a mortgage). If you get stuck, the IRS has a withholding calculator that will itemize your deductions, tell you how many allowances you can claim and determine the amount of income adjustments you’re allowed to have.

Because of the 2017 tax plan, you can no longer make some of the adjustments you used to make. Some that have been eliminated include deductions to cover alimony and moving expenses. Further, because the standard deduction has been doubled, some people who used to itemize deductions may no longer do so. (Learn more about how the new Republican tax plan will affect you.)

How to Fill out the Two-Earners/Multiple Jobs Worksheet

If you’re married to a spouse who works or if you work a second job, next you need to take a look at the two-earners/multiple jobs worksheet (page four of the W-4 instructions). The number from line H on the personal allowances worksheet goes on line 1 of this worksheet, unless you have deductions or allowances.

The two tables at the bottom of the page will help you complete lines 2 through 9. These tables basically show you which numbers to enter depending on which spouse makes the most/least amount of money and which of your jobs brings in the most/least amount of income.

Adding It All Up: Filling out Your W-4 Form

A Guide to Filling out Your W-4 Form

Using the information from the worksheets, you can now fill out your W-4 form. Once you’ve finished, the worksheets are yours to keep.

Lines 1 through 4 of your W-4 are for your personal information: your name, address, Social Security number and filing status. Line 5 is for the total number of allowances you’re claiming. This number comes from either line H on your personal allowances worksheet or the number from line 10 on your deductions and adjustments worksheet. Any extra money you want withheld from your check, or the total from the two earners/multiple jobs worksheet, goes on line 6.

In order to avoid withholding altogether, you have to fall into both of the following categories:

  • You had no tax liability in the previous tax season. All of the federal income tax you paid was refunded back to you.
  • You have no tax liability again this year

Generally, you can say you have no tax liability if you don’t need to file an income tax return or you owe zero taxes. You may also be able to claim an exemption from withholding if your income for the year is $1,000 or less.

If those conditions apply to you, you can write “exempt” in line 7. Keep in mind that the exemption only eliminates your federal income taxes. You still have to pay the Medicare and Social Security taxes.

Finally, sign the form and you’re good to go.

How Does the W-4 Form Differ From the W-2?

A Guide to Filling out Your W-4 Form

Yes, both of these forms start with the letter ‘w,’ but that’s where the similarities end.

Unlike a W-4, a W-2 form is what your employer fills out for all employees. It indicates the total amount of money that was withheld and put toward Social Security, Medicare, state, local and federal income taxes. A W-2 shows your annual earnings from wages and tips as well.

The Takeaway

All new employees need to fill out a W-4, and failing to turn in a W-4 can have big tax implications. You can also run into issues if you don’t include the right number of allowances on the form. Claiming too few allowances could mean smaller paychecks and a big tax refund. Claiming too many allowances could leave you owing money when you file your tax return.

After the W-4: Tips on Navigating Tax Season

Tax season can be a confusing and overwhelming time. With the number of different tax forms and codes out there, it’s difficult to keep track of them all. One way to ensure a stress-free tax season is by correctly filling out your W-4 form. In addition, it’s a good idea to start your tax preparation early and stay on top of the process.

If you’re unsure whether you need to file your taxes, there’s an income threshold that helps determine whether you should file. This threshold is determined by factors like age, earned income, unearned income and if someone claims you as their dependent.

If you’re struggling with specific numbers on tax forms, not to worry. There are a lot of calculators out there to make the process clearer. You can use a withholding calculator to determine your deductions, allowances and adjustments; or an income tax calculator to estimate what you will owe once April rolls around.

Keep in mind that this year’s tax season may be different than last year’s. Changes can range from a new tax deadline or updates to the tax code. If this is hard to keep track of, you can always hire a professional tax accountant to help.

Taxes are just one aspect of your financial situation. If you’d like to build or optimize a comprehensive financial plan, a financial advisor can help. SmartAsset’s financial advisor matching tool can help you find a professional to work with. First, you answer a series of questions about your financial situation and goals. Based on this info, we’ll match you with up to three advisors right in your area. You can then read their profiles to learn more about them and interview them on the phone or in person. Then, you can choose the advisor you’d like to work with.

Photo credit: IRS.gov ©iStock.com/PeopleImages, ©iStock.com/wdstock

Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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