The Payroll Blog
News, tips, and advice for small business owners
How to Fill Out the W-4
As an employee, there is no tax form more important than your W-4. Also known as an Employee's Withholding Allowance Certificate, this form is one that every employee needs to complete before his or her first day on the job.
The IRS makes it clear as to how this form is to be used:
"Complete this form so that your employer can withhold the correct federal income tax from your pay. Consider completing a new Form W-4 each year and when your personal or financial situation changes."
Breaking that statement down, there are two points to make note of:
- You must complete the form in the appropriate manner to ensure that the correct amount of federal income tax is withheld.
- Due to the fact that your situation can change from year to year, such as if you have a child, don't hesitate to complete a new W-4.
You don't need much knowledge of the tax system to complete a W-4 and move on with your business. However, neglecting to review the form in its entirely could lead to a mistake that causes you financial stress at some point in the future.
For example, it's possible that you could opt to have too much money withheld from each paycheck. As a result, you won't have as much money to get by on a monthly basis.
Conversely, you could make the mistake of not having enough money withheld. While this will benefit you throughout the year, with more money in each paycheck, you could be faced with a hefty tax bill upon completing your final return.
As you make your way through Form W-4, there won't be too many lines that confuse you. For the most part, the required information is both basic and to the point.
Questions often come into play when attempting to calculate allowances. To help avoid mistakes, use our calculator to your advantage. It's not the end all in regards to making accurate decisions, but it will definitely point you in the right direction.
As you complete your W-4, the word "allowances" will come up time and time again. It may sound complicated, but it's anything but that.
Here's the one thing to keep in mind: the more allowances you claim the less money your employer will withhold. Adding to this, consider the following:
- You are allowed one allowance for yourself.
- You are allowed one allowance for your spouse.
- You are allowed one allowance per dependent.
In addition to the above, there are times when you can claim additional allowances. These situations include:
- If your filing status is "head of household.
- If you will itemize your deductions.
- If you are eligible to claim a credit for child or dependent care expenses.
As you work your way through Form W-4, you'll eventually reach the end. When you do, you'll be asked to add up lines A through G to come up with the total number of allowances.
After you make your way through the Personal Allowances Worksheet portion of Form W-4, you are then required to complete the actual certificate. When doing so, you'll provide the following information:
- Your name.
- Your Social Security number.
- Your address.
- If you are singled or married.
- If your last name is different than what shows on your Social Security card.
- Total number of allowances you are claiming.
- Additional amount, if any, that you want withheld from each paycheck.
- If you are exempt from withholding.
Last, but certainly not least, there are three final steps:
- Sign the form.
- Date the form.
- Provide the form to your employer, typically the HR department.
Questions to Address
If you move from one step to the next, completing Form W-4 should never be too time consuming or stressful. There are some miscellaneous questions that may arise along the way. These include but are not limited to:
1. Should you request additional withholding? As noted above, you can ask that additional money be withheld from each paycheck. There are many times when this makes sense, such as if you have self-employment income or are working a second job.
The goal of requesting additional withholding is to ensure that you pay the right amount in taxes during the year, thus avoiding a lump sum payment along with your final return.
2. Are you exempt from withholding? Most people soon realize that the answer is no, but it's worth learning more about.
If you are exempt, it means your employer will withhold no federal income tax from your paycheck. You may qualify if you had zero income tax liability in the previous year and you don't expect this to change for the current tax year.
3. When does it make sense to complete a new W-4? You are not required to use the same W-4, year after year. If you want to complete a new form, you can do so and then provide it to your employer. You may want to do this if:
- You married within the last year.
- You divorced within the last year.
- You had a child within the last year.
- You want to request additional withholding.
When starting a new job, your employer will require that you complete and submit Form W-4. Also, there may come a time when you want to complete a new W-4, such as if your tax situation changes.
With this advice, you should have a clear idea of what this form is all about and how to complete it in an accurate and timely manner.
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.