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A Guide to Filling out Your W-4 Form

Update: Based on the new tax code signed by President Trump in December 2017, the IRS released new tax withholding guidelines. Taxpayers should have seen changes to their paychecks, reflecting the new tax plan, in February 2018. You may not have needed to update your W-4, but it is a good idea to double check your withholding tax allowances with the new IRS guidelines.

Tax forms can be hard to fill out, especially the first few times. Each form also comes with its own set of instructions, which makes the whole process seem confusing. Don’t worry – we feel your pain. We’ll take you through the process of how to complete a W-4 form, also known as an employee’s withholding allowance certificate.

W-4 Forms: The Basics

W-4s aren’t as scary as they may look. Employees complete this two-page form so that their employers know how much federal income tax needs to withhold from their paychecks. This affects how much money you will take home with each paycheck. You’ve probably come across a W-4 form if you recently got a new job or your financial situation changed due to something like a divorce or the birth of a child.

Let’s back up just a bit. What is withholding? It involves having a portion of your earnings taken and sent to the government. It’s the portion of your annual tax bill that comes out of each paycheck. Even if you’re not working, you may have taxes withheld from other sources of income such as pensions, commissions and awards.

Although you’re required to submit a W-4 when you’re first hired, you can turn in a new form as often as once a year or whenever you need to update your filing status. Depending on those changes, you may have more or less tax pulled from your wages.

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

What happens if you accidentally forget to give your employer your W-4? Prepare to have the IRS treat your income like it’s taking taxes from a single person with zero withholding allowances. That’s the highest possible withholding rate, and it could be a real problem if you need more take-home pay to buy a new house or cover some other expense.

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 of her employees. It indicates the total amount of money that has been 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.

Adding Up Your Allowances, Deductions and Adjustments

Before you can fill out a W-4 form, you’ll need to complete the personal allowances worksheet. To do that, 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.

You need to 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. But if you’re single and you have one job, you’ll enter a “1” for line A and a “1” for line D.

Write the sum of your allowances on line H. That will be “2” for the unmarried person with only one employer. If you have any deductions or income adjustments to make, you can then move on to the next section. It’s possible to get adjustments for paying alimony, moving and having a health savings account.

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

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

Anyone who’s married to a spouse who works or who works a second job herself/himself will next need to take a look at the two-earners/multiple jobs worksheet (page four of the 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 and least amount of money and which of your jobs brings in the most and least amount of income.

How to Fill out Your W-4 Form

A Guide to Filling out Your W-4 Form

The worksheets you’ve done so far weren’t a complete waste of time because you’ll need them to fill out your W-4 form. Once you’ve finished them, the worksheets are yours to keep.

Lines 1 through 4 of your W-4 are for your personal information: your name, Social Security number, address 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 sheet (which comes with the W-4) 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 have no tax liability this year
  • You had no tax liability in the previous tax season. All of the federal income tax you paid was refunded back to you.

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, not your Medicare or Social Security. After you’ve signed the form, you’re good to go.

The Takeaway

Failing to turn in a W-4 is a big no-no. But you could run into other issues if you don’t include the right numbers on the form. If you don’t pay enough, you might owe additional taxes later on. If you make the mistake of paying the IRS too much, you’ll get that money back in the form of a tax refund once you’ve filed your taxes.

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 when you start a new job. 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 early on to estimate what you will owe once April rolls around.

And keep in the mind that there are tax changes every year, so 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, you can always hire a professional tax accountant to help.

If you want a larger view of your financial situation and help reaching your financial goals, a financial advisor can help. It may sound daunting to wade through the options but SmartAsset’s financial advisor matching tool can help you find a person to work with to meet your needs. First you answer a series of questions about your situation and your goals. Then the program narrows down thousands of advisors to three fiduciaries who meet your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while doing much of the hard work for you.

Photo credit: ©iStock.com/davidf, ©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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