What is it?
The W-4 form is completed by employees and used by employers to calculate the amount of income tax to withhold. The form indicates an employee’s filing status, multiple jobs adjustments, amount of credits, amount of deductions, and additional amounts to withhold from each paycheck to compute the amount of federal income tax to deduct and withhold from pay.
How do I fill it out?
The W-4 form includes five steps; however, only step one and step five are required for completion.
- Step 1: Enter your name, social security number, address and tax-filing status.
- Step 2: If you have more than one job or your spouse works and you file jointly, follow the instructions on the form to receive a more accurate withholding. Read the instructions carefully to avoid errors. You will only need to complete option (a), (b) or (c). If you work multiple jobs, steps 3 through 4(b) should only be completed on one W-4 form, often for the highest paying job.
- Step 3: If your total income is less than $200,000 ($400,000 if filing jointly), you may account for the child tax credit. Enter how many children and dependents you have and multiply them by the credit amount ($2,000 for children under age 17 and $500 for other dependents).
- Step 4: If you would like extra tax withheld or expect to claim deductions other than the standard deduction when doing taxes, note it here. You may indicate other income, deductions and extra withholding in this section.
- (a) Other income (not from jobs): This may include additional income which might not be subject to withholding, such as dividends or retirement income.
- (b) Deductions: This line is for deductions other than the standard deduction (itemized deductions). The standard deduction reduces a taxpayer’s adjusted gross income to arrive at a taxable income. The greater the standard or itemized deductions, the less amount of tax liability.
- (c) Extra Withholding: Indicate an additional amount to withhold each pay period.
- Step 5: Sign and date the form.
You should file a new W-4 form when you do any of the following:
- Obtain a new job
- Choose to adjust withholdings at current job
- Marriage or divorce
- Birth or adoption of a child
- Your child no longer qualifies as a dependent
- Move or buy a house
- Receive a pay cut or pay raise
- You or your spouse freelance on the side
- You or your spouse is unemployed for any amount of time
- Received a large tax bill or a large refund last year
If you are exempt from withholding, write “exempt” below step 4(c) and complete steps 1 and 5 as usual. A new W-4 must be submitted each year to maintain exempt from withholding status. In order to be exempt, you must meet both the following:
- You received a refund of all of your federal income tax withheld last year because you had no tax liability, and
- You expect the same to happen this year.
If you have questions regarding the W-4 form and whether you should fill one out, please contact one of our Trusted Advisors and they will be happy to assist you.