What's the right way to fill out a W-4 Form? That's the tax form called a W-4 Employee’s Withholding Certificate that your employer hands you when you start a new job. If tax forms fill you with dread—you don’t understand them, you’re afraid of what will happen if you make a mistake—just keep reading. This article will explain what a W-4 is and walk you through how to fill out the form, which was completely revamped in 2020, line by line.
What Is Form W-4 Used For?
You complete a W-4 form so that your employer will withhold the correct amount of income tax from your paychecks. If you have an accountant or another tax preparer, confirm your decisions with them before you turn in the form.
The way you fill out Form W4, Employee's Withholding Certificate, determines how much tax your employer will withhold from your paycheck. Your employer sends the money it withholds from your paycheck to the Internal Revenue Service (IRS), along with your name and Social Security number (SSN). Your withholding counts toward paying the annual income tax bill you calculate when you file your tax return in April. That’s why a W-4 form asks for identifying information, such as your name, address, and Social Security number.
How to Fill Out a W-4
Step 1: Enter Personal Information
Provide your name, address, filing status and Social Security number. Easy. Your employer needs your Social Security number so that when it sends the money it has withheld from your paycheck to the IRS, the payment is applied toward your annual income tax bill. After completing this step single filers with a simple tax situation, as described above, only need to sign and date the form and they are done.
Everyone else will have to take a few more steps.
Important: If you don’t submit Form W-4 at all, the IRS requires your employer to withhold at the highest rate.
Step 2: Multiple Jobs or Spouse Works
Proceed to step two if you have more than one job or your filing status is married filing jointly and your spouse works. If this applies to you, you have three options from which you can choose one:
Option A
Use the IRS' online Tax Withholding Estimator and include the estimate in step four (explained below) when applicable.
Option B
Fill out the Multiple Jobs Worksheet, which is provided on page three of Form W-4 and enter the result in step 4(c), which is explained below. It is provided on page three of Form W-4, which your employer should have given to you, or you can download it from the IRS. The IRS advises that the worksheet should only be completed on one W-4 form and the result should be entered for the highest paying job only, to end up with the most accurate withholding.
Option C
Check the box in option C if there are only two jobs total and do the same on the W-4 for the other job too. Choosing this option makes sense if both jobs have similar pay, otherwise more tax may be withheld than necessary.
Step 3: Claim Dependents
If you have dependents, fill out step three to determine your eligibility for the Child Tax Credit and credit for other dependents. Single taxpayers who make $200,000 or those married filing jointly who make less than $400,000 are eligible for the Child Tax Credit.
Technically, the IRS definition of a dependent is pretty complicated (see IRS Publication 501 for details), but the short answer is that it’s a qualifying child or qualifying relative who lives with you and whom you support financially. There are income limitations here, too. Individuals with incomes of $175,550 and up or those married filing jointly earning $339,000 or more need not apply.
Multiply the number of qualifying children under age 17 by $2,000 and the number of other dependents by $500. Add the dollar sum of the two to line three.
Step 4: Other Adjustments
In this section, the IRS wants to know if you want an additional amount withheld from your paycheck. the information you've provided in the previous sections might result in your employer withholding too little tax over the course of the year. If they withhold too little, you will end up with a big tax bill and possibly underpayment penalties and interest in April. In that case, tell your employer to withhold extra money from each paycheck so that it doesn’t happen.
Step four of a W-4 allows you to have additional amounts withheld by filling out one or more of the following three sections:
4(a)
If you expect to earn "non-job" income not subject to withholding, such as from dividends or retirement accounts, enter the amount in this section.
4(b)
Fill out this section if you expect to claim deductions (such as itemized deductions) other than the standard deduction and want to reduce your withholding. To estimate your 2020 deductions use the Deductions Worksheet provided on page three of the W-4 form.
4(c)
This section allows you to have any additional tax you want withheld from your pay each pay period, including any amounts from the Multiple Jobs Worksheet if this applies to you.
Step 5: Sign and Date Form
While signing and dating a W-4 is the easiest step, it is no less important than any other. The form says, “Under penalties of perjury, I declare that I have examined this certificate and, to the best of my knowledge and belief, it is true, correct, and complete.” You have to sign your name below that statement, where it says, “Employee’s signature.” Then enter the date to the right. It's not valid until you do.
When Do You Need A New W-4?
In general, your employer will not send form W-4 to the IRS. After using it to determine your withholding, the company will file it. You only have to fill out the new W-4 form if you start a new job or if you want to make changes to how much is withheld from your pay. You can change your withholding at any time by submitting a new W-4 to your employer.
Situations when you might need to change your W-4 include: getting married or divorced, adding a child to your family, or picking up a second job. You may also want to submit a new W-4 if you discover that you withheld too much or too little the previous year when you're preparing your annual tax return, and you expect your circumstances to be similar for the current tax year. Your W-4 changes will take effect within the next one to three pay periods.