The Beginner’s Guide to Filling Out Form W-4

By TaxAct

Updated for tax year 2017.

When you start a new job as an employee, your new employer typically asks you to complete Form W-4Employee Withholding Allowance Certificate.

This document is a two-page Internal Revenue Service (IRS) form. It tells your employer how much money to take out of your paycheck to cover federal and state income taxes.

The IRS recommends submitting a new Form W-4 each year, as well as any time your personal or financial situation changes regardless of your tax bracket. This ensures the right amount of tax is withheld during the year.

For instance, if you get a promotion, get married or have a baby, you may want to adjust your W-4 to match the changes. Leaving it the same could result in too much money withheld each pay period – or worse, too little withheld resulting in a large tax bill come tax season.

Here are a few other things you should know about Form W-4.

Form W-4 worksheets

The bulk of a W-4 includes three different tax worksheets that ask information about your taxable income.

  1. The Personal Allowances Worksheet: This portion of the form indicates how many deductions – or “personal allowances” – you want to claim. Claiming more allowances reduces the amount of income withheld from your paycheck. Claiming one allowance or zero allowances may lead to a huge tax refund but reduces your takehome pay. (Quick tip: Use the Paycheck Plus calculator to help you determine the right number of allowances for your tax situation.)
  2. The Deductions and Adjustments Worksheet:  The second portion of the form is for people who plan to itemize deductions (such as child or dependent care or interest on student loans) on their tax return. If that’s you, be sure to pay attention to this section. This is where you provide an estimation of the number of deductions you plan to claim. But, don’t fret – this number doesn’t have to be exact. You can always claim more or less on your tax return. It simply gives the IRS a better idea of your tax liability.
  3. Two-Earners/Multiple Jobs Worksheet: This section is for people with two jobs or married people who both work. It calculates how much money you should withhold from your paycheck based on that second income.

Form W-4 Line 6

The beauty of W4 forms is that your employer handles withdrawing and paying your taxes for you based on your allowances.

But, if you have any unearned income (i.e. interest or dividends) or receive payment from freelance work, there is a good chance taxes are not automatically withdrawn from those payments. In that case, you’re responsible for ensuring the taxes due on that amount gets paid to the IRS.

One way to cover that cost is to make estimated tax payments throughout the year. However, if that seems like too much work, you do have another option.

On Form W-4, you can authorize your employer to withhold additional money from each paycheck to cover the taxes on that extra income. Simply mark the dollar amount you’d like withheld on line 6.

Keep in mind, that’s in addition to your “normal” withholding based on the number of allowances you claimed. Choosing to withhold more throughout the year can help you avoid a large tax bill when you file your return.

Know Your Tax Forms: Your W-4 is not your W-2

Form W-4 and Form W-2 may sound similar, but they serve separate functions when it comes to an employee’s tax situation.

Form W-4 is most commonly completed when you first start a new job.  Form W-2, Wage and Tax Statement, is given to you by your employer at the end of each year prior to filing your tax return.

On the form, you’ll find a variety of important information. That includes total wages earned, federal and state (if applicable) taxes withheld, and contributions to Social Security and Medicare for the time you worked for that employer during the calendar year.

Employers are required to send a W2 Form to each employee by January 31 of each year. They must also submit a copy to the Social Security Administration. The information listed on the form is used to complete your tax return and must be submitted to the IRS. It is not used to pay taxes or withhold taxes. Find a more comprehensive guide to filling out your W-4 here.

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