How to fill out a W-4

What is a W-4?

A W-4 is a form used by employers to determine the amount of federal income tax to withhold from an employee's paycheck. Typically your Human Resources representative will provide this on the first day of your new job, if not before then.

Filling out a W-4 form accurately helps ensure that you neither owe a significant amount at tax time nor give the government an interest-free loan. Regularly reviewing and updating your W-4 form can help you manage your tax liability effectively. Your dedicated Financial Advisor can help ensure you are setup with the correct withholdings.

Why Accurate Withholding Matters

• Avoiding Underpayment: Accurate withholding helps you avoid underpaying your taxes throughout the year, which can result in a large tax bill and possible penalties at tax time.
• Avoiding Overpayment: Conversely, overpaying your taxes means the government holds onto your money until you file your tax return and get a refund, which could impact your monthly cash flow.

Guide to Filling Out Your W-4 Form

Step 1: Personal Information

• Enter your most accurate and up to date personal and contact information.

Step 2: Multiple Jobs or Spouse Works (Optional but Recommended)

If you (and/or your spouse) have more than one job or if you have a working spouse, use one of the following methods to ensure the correct amount of withholding:

• Option A: Use the IRS's online Tax Withholding Estimator.
• Option B: Use the Multiple Jobs Worksheet on page 3 of the form.
• Option C: Check the box in Step 2(c) if there are only two jobs total (you have one and your spouse has one, or you have two jobs).

Step 3: Claim Dependents

If your total income is $200,000 or less ($400,000 or less if married filing jointly), you can claim the child tax credit and other dependents:

• Qualifying Children: Multiply the number of qualifying children under age 17 by $2,000 and enter the total.
• Other Dependents: Multiply the number of other dependents by $500 and enter the total.

Step 4: Other Adjustments (Optional)

This step allows for additional adjustments to withholding:

• Other Income: Enter any other income you expect this year that won't have withholding (such as interest or dividends).
• Deductions: If you expect to claim deductions other than the standard deduction, use the Deductions Worksheet on page 3 to estimate the total and enter it here.
• Extra Withholding: If you want an extra amount withheld from each paycheck, enter the amount here.

Step 5: Sign and Date

Tips for Accurate Withholding

• Review Annually: Revisit your W-4 form annually or after significant life changes (like marriage, divorce, or the birth of a child).
• Check IRS Tools: Use the IRS Tax Withholding Estimator online to double-check your entries and ensure the right amount of tax is being withheld.
• Seek Help if Needed: Consult with a tax professional if you have complex tax situations.

FAQs

When Should I Update My W-4?

• Life Changes: Update your W-4 after significant life events such as marriage, divorce, birth or adoption of a child, or when a dependent is no longer eligible.
• Income Changes: If you or your spouse get a new job, lose a job, or have other significant changes in income, you should update your W-4.
• Adjustments for Tax Situations: If you start or stop an additional job, or if your spouse’s employment situation changes, an updated W-4 can help adjust your withholding to reflect these changes.

Special Considerations

• Multiple Jobs: If you have multiple jobs, or if both you and your spouse work, the withholding amounts can get complicated. The IRS Tax Withholding Estimator can help you figure out the correct amount of withholding. You should also check with your Advisor - they are happy to help you!
• Additional Income: Income from self-employment, interest, dividends, or retirement can affect your tax liability. Consider additional withholding or making estimated tax payments.
• Deductions and Credits: If you itemize deductions or are eligible for certain tax credits, your withholding amount may need to be adjusted accordingly.

Common Questions

• What if I Don’t Submit a W-4? If you don’t submit a W-4, your employer will withhold taxes at the highest rate for single filers with no adjustments.
• Can I Claim Exempt? You can claim exemption from withholding if you had no tax liability last year and expect no tax liability this year. However, this means no federal income tax will be withheld from your paycheck.
• What if I Make a Mistake? You can submit a new W-4 form at any time to correct errors or update your withholding.