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What Is Form W-4?
Form W-4, also known as the Employee’s Withholding Certificate, is used to determine how much federal income tax will be withheld from your paycheck. When you start a new job, you fill out this form to tell your employer how much tax to withhold. The amount withheld is sent to the Internal Revenue Service (IRS) in your name and Social Security number. When you file your annual tax return, you will be credited with the tax amount paid from your paycheck throughout the year.
Key Takeaways
- Employees complete Form W-4 to inform their employers how much tax to withhold from their paychecks.
- The amount withheld is based on factors like filing status, dependents, anticipated tax credits, and deductions.
- Incorrectly filling out the W-4 could result in underpayment or overpayment of taxes.
- You can submit a new W-4 if your circumstances change, such as a new job or a change in dependents.
- A new W-4 must be completed with each new employer.
Why Is Form W-4: Employee’s Withholding Certificate Important?
Form W-4 is crucial because it helps ensure that the correct amount of federal income tax is withheld from your paycheck. If you don’t withhold enough tax, you may face penalties and interest when you file your tax return. On the other hand, if you withhold too much, you’ll receive a refund when you file your return, but your paycheck will be smaller throughout the year.
You fill out a new W-4 form if you start a new job or change the amount withheld from your pay.
How to Fill Out Form W-4
If you are single, have a spouse who does not work, do not have dependents, have income from one job, and do not claim tax credits or itemize deductions on your tax return, filling out a W-4 is easy. You’ll need to provide your name, address, Social Security number, and filing status. Based on this information, the IRS will automatically calculate your standard deduction and tax rates.
If you have a more complex tax circumstance—such as multiple jobs, a spouse who works, or income from other sources not subject to withholding— you can adjust your withholding using Form W-4. For example, you may want to increase your withholding if you have multiple income streams to avoid underpayment.
You can also reduce your withholding if you are eligible for income tax credits such as the child tax credit or credit for other dependents, or you are eligible for deductions other than the basic standard deduction, such as itemized deductions, the deduction for IRA contributions, or the deduction for student loan interest.
If you do not submit a W-4, your employer will withhold taxes as if you are single with no adjustments.
All pages of Form W-4 are available on the IRS website.
Estimating Your Income Taxes
The IRS offers an online Tax Withholding Estimator to help you calculate the correct amount of tax to withhold from your paycheck. Employers use IRS Publication 15-T to determine withholding based on the information you provide on your W-4.
Using Form W-4, you can instruct your employer to withhold an additional sum to support other income sources such as self-employment pay, interest, dividends, or retirement income.
You can also use Form W-4 to prevent your employer from withholding any money from your paycheck, but only if you are legally exempt from withholding because you had no tax liability for the previous year and expect no tax liability for the current year.
Revising Form W-4
You may need to submit a revised W-4 if your situation changes, such as getting married or divorced, having a child, or picking up a second job. You can also submit a new W-4 form if you discover that you withheld too much or too little tax from the previous year.
What Happens If I Begin a Job in the Middle of the Year?
If you begin a new job partway through the year and will work less than 245 days that year, request that your employer use the part-year method for withholding. Otherwise, the standard withholding formula assumes a full year of income, and you may have too much withheld. You’ll have to wait until tax time to get the excess back.
How Do I Fill Out a New W-4 Form?
If you are single, have a spouse who does not work, do not have any dependents, only have income from one job, and do not claim tax credits, provide your name, address, Social Security number, and filing status, and sign and date the form. The IRS has an online Tax Withholding Estimator to help you determine the amount to be withheld from your pay.
What Is the Difference Between a W-2 and a W-4?
Form W-4 tells your employer how much tax to withhold from your paycheck. Form W-2, on the other hand, is provided by your employer at the end of the year and reports the total income you earned and the total amount of tax withheld. While everyone must complete a W-4 when starting a job, the W-2 is used by employers to report your wages to the IRS.
The Bottom Line
Your employer should provide a W-4 form when you are hired. Filling out your W-4 correctly helps you avoid tax penalties and ensures you pay the right amount of taxes throughout the year. Keep your W-4 up to date, especially if your personal or financial situation changes, to avoid any surprises at tax time.