What Is Form W-4?

The IRS Form W-4 is tax form completed by employees in the United States to indicate their tax situation to their employer. It helps the employer ensure the correct amount of federal taxes are withheld from the employee's paychecks.

The word “payday” brings a smile to almost everyone’s face and quite a few sighs👍 of relief as well. That includes the folks at the Internal Revenue Service (IRS), which already has its han🌼d out for its share of your money.

According to the Internal Revenue Code, income must be withheld from employee paychecks for taxes before the employees receive them. Th෴e amount withheld depends on IRS Form W-4, which employees must fill out and provide to their employers when they begin a new job.

The United States government requires that you contribute to your tax obligation on income as you earn it. “Some tax for🎉ms remain relevant year-round,” says Armine Alajian🦋, CPA and CEO and founder of .

“One is the W-4, an important document that plays a crucial role in your paychec💛k and ultimately in your annual tax return.”

Income that’s subject to withholding goes beyond your regular pay. It also includes vacation pay, any commissions or bonuses you might earn, and some expense allowances. Pension payments are subject to withholding as well.

How Form W-4 Works

Employers mℱust provide workers with a Form﷽ W-4 to complete and submit when they’re hired.

The information contained on the form tells employers how much income to withhold for taxes from wages and salary paid to the employee. Employers then forwar💙d the money to the government on the employee’s behalf.

Accurately completing Form W-4 is your opportunity to 🦂specify numerous details of your tax situation that will help estimate the tax you’ll owe on your earnings at year’s end when you file your r🍨eturn.

These details include your 澳洲幸运5官方开奖结果体彩网:filing status, other sources of income (not from jobs), income from other jobs, and tax credits and deductions that you anticipate claiming.

You can opt to have extra tax money withheld from your pay or you can claim an exemption from withholding if you qualify.

What If You Don't Submit Form W-4?

Em𝔍ployers are obligated to withhold income according to some unfavorable terms if they don’t have a W-4 on which to base their calculations.

The worker will be assigned the single or 澳洲幸运5官方开奖结果体彩网:married filing separately filing status even if they’re married or qualify as head of household and are entitled to lower tax rates and perks. They’ll be credited with the standard deduction for that status and nothing else. More taxes will be withheld from their paychecks as a result.

The repercussions don’t end there. You could be charged a penalty for underpayment of taxes when you ultimately file your tax return although there are some exceptions to this rule such as if your underpayment was “due to reasonable cause and not willful neglect,” according to the IRS.

Submitting Form W-4 is critical, according to , principal attorney and founder at The W Tax ꦕGroup.

“It helps to make sure that the tax taken out of your paycheck throughout the year aligns with what you’ll owe when you file your tax return at the end of the year. Withholding less might sound like a good idea but you’ll face a tax bill with penalties if you aren’t able to pay when you owe at the end of the year.”

Form W-4 Exemptions

An alternative 💖to not submitting a Form W-4 to your employer is to claim an exemption from withholding but you must qualify under some narrow circumstances.

You’re exempt from withholding if you had no 澳洲幸运5官方开奖结果体彩网:tax liability in the previous year and don’t expect to have one in the current year.

This exemption only covers one year so you’ll have to submit a new W-4 each year you qualify if you want to claim it again. The deadline is Feb. 15 of the tax year for which you’re claiming it.

Students who work part-time or during the summer months may also be exempt from withholding.

How to Fill Out Form W-4

Completing Form W-4 isn’t as challenging as it might appear at first glance. The form comes with several worksheets that walk you through the process 🍃step by step.

Step 1: Enter 𒉰your personal information such as your filing status and your number of dependents. This information establishes your standard deduction and tax r☂ate.

Step 2: This applies if you'll report more than one source of income on your tax return. Maybe you have more than one job or you’re married and plan to file a joint tax return with your spouse and your spouse also works.

Step 3: List any tax credits you anticipate claiming that will ultimately ꦿreduce the tax you owe.

Step 4: Enter income you receive from non-employment sources as well as any 澳洲幸运5官方开奖结果体彩网:tax deductions you plan to 🐈claim on your return instead of, or in addition to, the standard deduction.

You can also use this step to let your employer know that you want additional income withheld. Simply enter an extra amount you’d like withheld from each paycheck.

“Answer the questions accurately and you’ll be fine,” Weisberg says, “but use the IRS withholding estiꦓmator if you’re unsure or talk🙈 to a tax professional.”

澳洲幸运5官方开奖结果体彩网: All pages of form W-4 are available .

How Much Should You Have Withheld?

“Choosing the right amount to withhold is aౠ balancing act,” Alajian says. “Some individuals prefer to have more withheld to receive a larger refund while others opt for less withholding to maximize their take-home pay throughout the year. Careful planning, including adjusting your W-4 as needed, can help you avoid unexpected tax bills or refunds that could have🌺 been money in your pocket sooner.”

“Are you earning money on the side?” Weisberg asks. “Do you receive dividends or rental income? Wh♔at about retirement distributions? It might make sense to withhold extra money from your paycheck to cover the extra taxes if you have sources of income that you aren’t withholding tax from.”

The IRS estimator tool will tell you how the amount of your withholding will affect any tax refund that you might expect, taxes you could owe when you file your return, and the amount of your take-home pay.

If Your Tax Situation Changes

Life happens and your tax withholding may not be accurate if your circumstances shift significantly during the year. You should fill out a new form if this happens.

“You need to update your For🌳m W-4 if you get married, divorced, have 🐟a child, start a side hustle, or start a second job,” Weisberg cautions.

“If you wait until the end of the year, you may have ꦺtoo little tax withheld whi🤪ch will result in a tax bill when you file.”

Employers must adjust your withholding amounts in the first paycheck you receive 30 days on or after you submit a revised form.

You have a deadline, too: 10 days after the change occurs if you won’t have sufficient income withheld for the current year based on your existing Form W-4.

Some more obscure circumst♐ances can require that 𝔍you submit a revised W-4, as well. The IRS provides this list:

• You or your spouse expect a raise of more than $10,000 in regular wages (not a bonus) at a second or third job, and the Form W-4, Step 2(c), checkbox is not selected on your Forms W-4.
• You no longer expect to be able to claim a Child Tax Credit you took into account on a previously furnished Form W-4.
• The other credits you noted on a previously furnished Form W-4 decrease by more than $500.
• Your deductions decrease by more than $2,300 from the amount on a previously furnished Form W-4.
• You no longer reasonably expect to claim exemption from withholding. 

The Bottom Line

“Form W-4 instructs your employer on how much federal income tax to wit💫hhold from your paycheck,” Alajian says.

“Properly completing this form helps to ensure that you pay ❀the correct amount of taxes throughout the year, helping you avoid a large tax bill or, conversely𓂃, giving the government an interest-free loan through excessive withholding.”

You want to tꦅake home as much of your earnings as possible each pay period but you don’t want a nasty surprise tax bill come tax time.

The tools and instructions for Form W-4 that are provided by the IRS are extensive and helpful but you may want to seek a professional’s advice if your tax situation is complicated.