A Simple Guide to IRS Tax Form W-4

Many people fill out their W-4 without fully understanding how it impacts their tax bill. But it’s easier to understand than you might expect! Your W-4 tells your employer how much federal income tax to withhold from your paycheck. This helps ensure that you pay the right amount of taxes throughout the year. In this guide, we’ll explain the purpose of the W-4 and walk you through how to fill it out correctly.

What is Form W-4?

Form W-4 is officially known as the Employee’s Withholding Certificate. As mentioned, your employer uses the information on this form to calculate the appropriate amount of payroll taxes to send to the IRS. Without the W-4 your employer could withhold too much — resulting in low take-home pay — or too little — resulting in a hefty tax bill at the end of the year.

If you already have a W-4 on file with your employer, there’s no need to fill out a new one every year. You should update your W-4 whenever you start a new job or any time you wish to adjust your withholdings.

How to Fill Out Form W-4

The W-4 form consists of a four-page packet, but the actual form is just one page long and includes five simple steps:

Step 1) Personal Information

Fill in the following:

Your full name and address
Your Social Security number
Your filing status (single, married or married but filing separately)

Step 2) Account for Multiple Jobs

If you have more than one job or if both you and your spouse are working and filing jointly, this step applies to you. Complete steps 2 through 4(b) on the W-4 for the highest-paying job, and leave these steps blank on the W-4s for your other jobs.

Step 3) Claim Dependents

In this step you can claim dependents, such as children. If your income is under $200,000 (or $400,000 for married couples filing jointly), you can enter the number of dependents and multiply that by the applicable credit amount.

Step 4) Further Adjust Withholdings

This optional section lets you adjust your withholding. You can choose to have more or less tax withheld from your paycheck depending on your needs. For example, if you want additional taxes withheld or plan to claim deductions other than the standard deduction, this is where you can make those adjustments.

Step 5) Signature

The last step is where you sign and date the form to verify that all the information you provided is accurate.

Why You Might Want to Revise Your W-4

The latest version of Form W-4 introduced in 2020 was the most significant update since the Tax Cuts and Jobs Act of 2017. If you’ve been with the same employer since before 2020 it’s a good idea to check your W-4 and make sure it’s up to date.

You should also consider revising your W-4 if you received a large tax refund or owed taxes at the end of the year. A large refund could mean you’ve overpaid, while owing taxes may indicate that you’ve underpaid. Adjusting your withholding can help you get closer to breaking even at tax time.

Additionally, life changes like marriage, divorce, the birth of a child or starting a new freelance job (along with your current job) may affect your tax situation. If any of these apply to you it’s a good idea to update your W-4 to reflect these changes.

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Read more articles like this on HZCU’s Financial Knowledge Hub.

At Horizon we’re great at banking, but we’re not tax professionals! If you have questions about your specific tax situation, make sure to consult a tax expert. You can also learn more on the IRS website.