The IRS Form W-4 is used by your employer to determine how much of your paycheck will be withheld for state and federal taxes. Filling out the form correctly and updating it appropriately will help you avoid overpaying or owing taxes when you file your return.
You’ll most likely see this form when starting a new job. Keep reading to learn how to complete Form W-4.
What is IRS Form W-4?
As mentioned above, IRS Form W-4 tells your employer the amount of money to take out of your paycheck for federal and state taxes. When filled out correctly, it prevents you from overpaying or owing taxes.
Who should fill out a W-4?
Every employee required to file income taxes must fill out a federal W-4 for tax withholding. Similarly, if you live in a state that collects income taxes and you meet the requirements to file taxes, you must complete a state W-4.
How to complete Form W-4
Form W-4 was redesigned in 2020, removing allowances and exemptions. Instead of taking allowances, you can follow the steps listed below.
Step 1 – Enter your personal information
Step 2 – Enter multiple jobs or indicate that your spouse also works. If you both work, it’s important to come together and coordinate your forms.
Certain factors, like deductions and dependents, must only be accounted for on one spouse’s form. Otherwise, you may end up withholding too much or too little come tax time.
Step 3 – Claim dependents to show if you’re eligible for the Child Tax Credit or Child and Dependent Care Credit
Step 4 – Indicate other adjustments (if necessary). In this section, you can account for additional sources of income, like interest, dividends, and retirement income. Any deductions apart from the standard deduction would be included here.
Step 5 – Sign the form and send it to your employer
How do I fill out Form W-4 if I have 2 jobs?
Step 2 on Form W-4 lets you account for multiple jobs. It’s important to report all your earnings on a W-4, so the proper amount of income tax is withheld. If you have a side gig, are self-employed, or receive a Form 1099, you can include that additional income on your W-4 too.
Note: If you are married, Step 2 is also where you would indicate that your spouse works.
What happened to allowances?
Prior to tax year 2020, a withholding allowance number on your W-4 was used by your employer to determine how much of your income to withhold for state and federal taxes. This was removed for tax year 2020 because of a large increase to the standard deduction.
About the State W-4 Form
If you don’t live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, you may have to complete a separate W-4 for the state in which you reside. This form serves the same purpose as the federal W-4, but to withhold state income. Visit your state’s department of revenue website for information on completing a state W-4.
How often should I check/adjust my W-4?
As a rule of thumb, you should reevaluate your withholdings when you get a new job, start a side hustle, or you’re in the midst of a big life change, like having a baby or getting married. When you want to adjust your withholdings, contact your employer.
