How to fill out a W-4 form when you switch employers or your life circumstances change
If you’re filling out a W-4 for the first time in a while, you might notice some changes in the form that tells your employer how much tax to withhold from your paycheck. The Internal Revenue Service redesigned it in 2020 in a way that’s intended to make things easier and more accurate. While the underlying information is the same, the new W-4 “replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees,” according to the IRS.
Getting your withholding amount right is important because it can keep more money in your pocket by not overpaying and ensure you don’t have a hefty tax bill when tax season rolls around because you haven’t paid enough. Here’s what’s changed in the W-4 and how to fill one out.
What Is the W-4 Form?
A W-4 form is provided by the IRS and lets your employer know how much to withhold from your pay each pay period based on withholding tables provided by the IRS. The idea is to get your withholding just right so you don’t owe a fortune in taxes at the end of the year or receive an unusually high refund. This could occur because had too much withheld so the IRS held onto the excess all year and is now returning that money to you—without interest.
Perhaps the most significant change to the form is the removal of certain allowances for additional income, deductions, and tax credits, which previously determined the amount of your withholding. However, because of the 2017 Tax Cuts and Jobs Act, personal exemptions were eliminated from the tax code, and allowances and exemptions went hand-in-hand.
Despite the changes, your employer will still forward the withheld income tax to the IRS on your behalf on a pay-as-you-go basis so you won’t be left in the dark about the amounts being withheld.
Many employers will include the information on your pay stubs, and you’ll receive a Form W-2 after the close of the tax year, showing you the totals so you can enter this information on your tax return.
5 Steps To Filling Out Your W-4
The 2022 Form W-4 includes five steps on the first page, followed by a page of instructions then two pages of worksheets. Only Steps 1 and 5 are required to be filled out. Steps 2 through 4 are dedicated to extra information that might affect the amount of your withholding in certain situations.
Step 1: Enter Personal Information
The first step is fairly straightforward. This is where you enter your name, address, and Social Security number. The only tricky part might be indicating your filing status. You’ll need some knowledge of what each implies and which you qualify for. You have three choices here at 1(c):
You must be unmarried, have at least one dependent, and pay for more than half your household expenses to qualify for the advantageous head of household status. Check with a tax professional if you think you might qualify.
Step 2: Multiple Jobs or Spouse Works
The IRS suggests that you use its withholding estimator provided online to calculate the most accurate withholding amount in these situations. Or you can use the worksheet on page 3, but the IRS says that you shouldn’t do both. The result of either option is carried forward to Step 4.
Check the box at 4(c) if there are only two jobs involved here: You work two jobs, or you and your spouse each work one job. This indicates to your employer that the usual withholding for your filing status should be cut in half, and it generally results in close-to-accurate withholding only if all jobs pay about the same.
Step 3: Claim Dependents
This is where you tell your employer how many dependents you’re supporting. More dependents can mean less withholding if you’ll be claiming the child tax credit or the credit for other dependents on your tax return.
Multiply your number of qualifying dependents by the appropriate dollar amount shown on each line and enter the total so your employer can accommodate this information when calculating your withholding. You can skip this section if you have no dependents.
Step 4: Other Adjustments
This section allows your employer to adjust for three other situations that might affect your withholding amount. You can enter dollar figures in 4(a), 4(b), and/or 4(c) if you want more or less withheld from your pay under three circumstances.
4(a): Use 4(a) if you want your employer to withhold extra because you have other sources of income (not jobs as an employee) from which taxes aren’t withheld. Think investment income or retirement benefits. Enter the amount of income you receive from these sources.
4(b): Use 4(b) to line up your withholding to reflect tax deductions other than the standard deduction that you intend to claim when you file your tax return. Maybe you’re planning to itemize instead, or you’re eligible to claim “above the line” deductions for things like student loan interest or certain retirement contributions. You should have less withheld from your pay in this situation to accommodate these expenses that will shave dollars off your taxable income when you prepare your return.
4(c): You can ask your employer to withhold extra money at 4(c) with no explanation as to why you want to do so. Just enter how much additional money you would like withheld pay per pay period. You might want to do this if you earn money on the side that’s not subject to withholding, maybe as an independent contractor, and you’d rather that your employer wasn’t privy to this information.
You can also claim an exemption from withholding entirely in this section if you qualify. Just write “EXEMPT” in the empty space at the end of this section that appears below 4(c). You won’t be considered exempt if you enter the word at any other place on the form.
You must complete and submit a new Form W-4 by Feb. 15 of each year to continue claiming an exemption from withholding. It doesn’t roll over from one year to the next if you don’t take this step.
Step 5: Sign Here
How many allowances can be claimed on a W-4 form?
“If you’d rather have more net pay now and deal with the possibility of having to pay higher taxes when filing your tax return, you can do that,” said Bill Weekes-Ruesch, MBA, CPA . “Or, you can choose to have more taxes withheld as you go, resulting in either a larger tax refund or lower tax liability when filing your return.”
It may seem nice to get a big tax refund in the mail when you claim exemption from withholding on your W-4 tax form , but you’ll wish you had access to those funds earlier if you need them for an emergency or any unforeseen expense. You’re likely better off having the money that’s rightfully yours in a savings account or other fund than with the IRS, so you can access that money on your own terms.
Fill Out Your W-4 Form Correctly To Avoid a Massive Tax Bill
Do you feel more confident about filling out the W-4 after reading through these steps? Hopefully, this guide and toolkit will help you through the process of filling out your W-4 form. Whether this is the first time you have filled out a W-4 or if you have filled out several over the course of your career, it is always good to have a refresher in order to understand what is happening with your earned pay at every step.
Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert.