A Beginner’s Guide to Completing a W-4 Form
Maybe you started your first job, or maybe you gave up your freelance life and took up full-time work. Whatever your scenario, if you find yourself filling out W-4 for the first time, you might be a little confused by all the fields, worksheets, and forms. Yes, the IRS can be confusing. Let’s do it step by step.
Enter your personal information
When you start a new job as an employee , your new employer will issue you a W-4 . Your W-4 is a four-page IRS form that basically tells your employer how much money needs to be taken out of your paycheck to cover taxes, and it was amended in 2020 to help people claim the most accurate tax deduction possible.
Step 1. Entering your personal information should be fairly easy. Enter your name, address, social security number (now is a good time to remember your SSN if you haven’t already) and indicate if you are single, jointly married, or head of household.
The term “head of household” is probably the only confusing part of this section, but the IRS explains what “head of household” means in a straightforward manner: “Only check if you are unmarried and pay more than half of your maintenance costs. create a home for yourself and a suitable specialist. ” If it’s not you, don’t check the box.
A note on exceptions
If you are exempt from withholding tax, you only need to complete Step 1 (a), Step 1 (b), and Step 5, and then you can write “Exempt” on Form W-4 in the box below Step 4 (c). Typically, you can only claim tax exemption if you have no tax liability, meaning you did not owe any taxes last year because of the income you earned, or you didn’t need to file a tax return at all.
However, you definitely do not want to apply for tax exemption if you are not actually exempt. You won’t have federal income tax withheld from your paycheck, so when you pay taxes in April, you have a giant tax bill that includes late fees.
Count the number of jobs you and your spouse are doing (if applicable)
This is where it starts to get a little confusing. Step 2: Multiple Jobs or Spouse’s Job: “Complete this step if you (1) work multiple jobs at the same time, or (2) are married and your spouse is also employed.” If none of these scenarios work for you, ie, if you only have one job or your spouse is not working, you can skip this section. Very simple!
If you and your spouse have a job with roughly the same wages, you can also skip this section after you check box C, which indicates that you each have one job and both of you earn the same amount. (Make sure your spouse also ticks box C on their W-4.)
If you work multiple jobs, or you and your spouse have jobs with different wages, you need to go to page 3 and complete step 2 (b) – Multiple jobs table – or maybe you want to skip the worksheet and use an online IRS withholding tax assessor that asks the same questions and doesn’t require you to calculate the answers yourself. (I highly recommend using an online estimator.)
Either way, you are likely to get a “collateral withholding” number, which is the amount of extra money you would like to withhold from each billing period to help you avoid additional taxes when filing your tax return. (If you are using an online appraiser, this number will be located in the “How to Adjust Withholding” subsection.) This additional withholding number appears on your Form W-4 in step 4, line 4 (c).
State your dependents (if any)
If you have multiple jobs, or if you are married and are applying jointly and each of you and your spouse has a job, you only need to complete Step 3: Dependents Application for one of these positions . The IRS recommends that you complete Step 3 on the W-4 for the highest paying job; on your (or your spouse’s) other W-4 Forms, leave blank.
Step 3 is pretty simple. If your income is $ 200,000 or less ($ 400,000 or less if married together), multiply each child under 17 by $ 2,000 and each additional dependent by $ 500. Add up the numbers, write down the total, and you’re done.
Make other adjustments (if applicable)
Step 4 (optional): Other adjustments , as the name suggests, are optional. It’s also pretty confusing, so let’s go over it together.
If you have multiple jobs or are married and are applying jointly and you and your spouse are both employed, you should complete lines 4 (a) and 4 (b) for only one of these positions . Once again, the IRS recommends filling out these lines on the W-4 associated with the highest paying job; in other forms W-4, leave these two lines blank.
Line 4 (a) asks you to calculate all other taxable income not earned from work, such as interest, dividends, or retirement income. This way, you can deduct the required tax from your paycheck now so you don’t pay it later.
Line 4 (b) asks you to go to page 3 and complete Step 4 (b) – Deduction Worksheet . This worksheet will help you determine if you are better off using the standard deduction or list your deductions by line . (Important note: This link leads to an article that reflects tax year 2019; standard deductions have increased for 2020. ) You will also be able to calculate any other applicable tax deductions, such as student loan interest or deductible IRA contributions.
Once you have completed 4 (a) and 4 (b), all that is left to do is complete line 4 (c), which indicates the amount of additional tax you want to withhold for each billing period. If you already calculated this number in step 2, you’re done! If not, I recommend using an online IRS withholding tax assessor to determine if you need back-up withholding.
Sign your W-4 and turn it in
It’s finally time for Step 5: Sign here. Sign your worksheet and give it to your employer. And it’s all! Only as much should be deducted from your paycheck. In April, you won’t owe a lot of money, but you won’t get a huge refund either.
Anytime you face any major change in your life, you will also want to update this form. Obviously, if you get a new job, you fill out a new one, but if you get married, have a child, or get a second job, you will ask for a new W-4 and then make the appropriate adjustments.
This post was originally published in 2017 and has been updated in 2019 to provide more current and accurate information. It has been updated again by Nicole Dicker on 7/9/20 with the following changes: updated links, fresh headings to reflect the current style, and updated information to reflect current tax laws.