When you start a new job as an employee, one of the first steps is to fill out the Internal Revenue Service Form W-4, which helps your employer determine how much federal income tax to take out of your pay. When filled out correctly, this form helps you avoid tax penalties from underpayment, and it also reduces the likelihood you overpay and have to wait for a tax return. The IRS provides detailed instructions and helpful worksheets so you can fill out your W-4 accurately for your personal financial situation.
What Is IRS Form W-4?
Your employer uses Form W-4 to obtain information about your marital status, number of allowances and preference for additional federal income tax withholding. They use this document to determine how much federal income tax (but not Social Security or Medicare tax) to collect from each of your paychecks.
This form is very important since if too little federal income tax is taken out, then you may owe the IRS additional money when it comes tax time. On the flip side, too much money taken out for federal income tax can mean you get a refund when you file your taxes.
What Does the Form Contain?
When you look at IRS Form W-4, you'll notice it spans several pages with instructions and worksheets. On the first page, you'll find important instructions for using the form, and then the actual Form W-4 (Employee's Withholding Allowance Certificate) that you fill out and give your employer.
There are three accompanying worksheets on pages three and four that will help you calculate how many personal allowances you should take. These worksheets use information about how many jobs you and your spouse have, your incomes, how many children and other dependents you have and any other tax credits you're eligible for to make a calculation for the allowance number. They also handle multiple earners and special tax filing situations.
Where Do I Find Form W-4?
When an employer hires you, they will give you a W-4 form to fill out as part of your onboarding process. If you ever need to make changes to the form, you can likely obtain a new one from your workplace's human resources department.
You can also find Form W-4 through the Forms and Instructions link on the IRS.gov homepage to view a list of common tax forms. You'll find the link to download a W-4 form if you scroll about halfway down the page. While you can fill out most of the info in your computer's PDF reader, you will still need to print the form and physically sign and date it.
If you'd prefer a copy mailed to you, contact the IRS by phone at 1-800-829-3676 to request the form.
How to Fill It Out
To begin filling out Form W-4, Employee's Withholding Allowance Certificate, you'll enter your name and address in Line 1, your Social Security number in Line 2 and your marital status on Line 3. When specifying your marital status, you can choose single, married or "married, but withhold at higher single rate." You'd choose the latter option if you're married and filing separately. You'll check the box on Line 4 if your last name on your Social Security card is not current.
Lines 5 through 7 deal with your allowances and exemption from withholding. You'll enter the total allowance number on Line 5 and enter any additional amount you want taken out for federal taxes on Line 6. In the rare case you're exempt from federal taxation, you'll write "exempt" on Line 7.
The last step is for you to sign and date the form in the box below Line 7. Your employer will fill out their name and address, your first date of employment and their employer identification number on lines 8 through 10.
How Do I Determine Allowances?
Determining the right number of allowances is crucial for proper federal tax withholding. Luckily, the IRS makes this easier with the Personal Allowances Worksheet included with Form W-4.
For lines A through G, you'll follow the form's instructions to specify the given allowance number (such as 0 or 1) if a specific situation (like being single, married or head of household) or other characteristic applies to you.
On Line H, you'll add up lines A through G to get the number of allowances you'll put on Line 5 of the W-4 form.
For example, if you're single and childless with one job and no tax credits, you'd specify one allowance on both Line A and D, totaling two allowances. On the other hand, if you're married filing jointly with a $75,000 total income and get the Child Tax Credit for one child, you'd enter one allowance on both Line A and Line B and enter four allowances for your child on Line E, meaning you have six allowances. If you wanted the maximum federal tax withheld for some reason, you could just specify zero allowance rather than calculate allowances.
If your tax situation is more complex – maybe you itemize deductions or have non-wage income from self-employment, then you can use the 10-line Deductions, Adjustments and Additional Income Worksheet. If you need help determining allowances when you have multiple jobs or two earners in your household, the 9-line Two-Earners/Multiple Jobs Worksheet can come in handy.
How Do Allowances Impact Withholding?
For 2019, the IRS Publication 15 reports that each withholding allowance is worth $4,200 a year, which works out to $80.80 weekly or $161.50 biweekly deducted from your gross wage payment for the period. So, if you're paid $800 weekly and have one allowance, your federal taxable income would be reduced by the $80.80 weekly allowance to $719.20. Your employer would then calculate your federal tax based on that reduced income.
Therefore, having more allowances means you'll see more take home pay since your taxable income goes down. On the other hand, if you declared zero allowance, then you'd see the least take home pay since you'd be taxed based on your original wage.
When tax time comes around, you may face a tax penalty and owe additional taxes if you declared more allowances than you should have. If you overpaid, you can expect a refund for the excess federal tax your employer collected.
Read More: How to Determine W-4 Withholding Allowance
What Is Exemption From Withholding?
Being exempt from withholding means that no federal income tax will be taken out of your paychecks, but it does not affect your Social Security or Medicare tax liability. You'd select this option on your W-4 form only if both these conditions apply to your tax situation:
- You got all of your federal income tax refunded for the last tax year since you ended up with no tax liability.
- You have no tax liability for the current tax year either and thus expect a full refund of any federal tax your employer withholds.
The W-4 instructions note that declaring exemption from withholding only applies through Feb. 15 (or the following business day if it falls on a weekend or holiday) of the next tax year. So, if you filled out a W-4 for the 2019 tax year on Feb. 14, 2019, and declared yourself exempt, that exemption would expire on Feb. 17, 2020. If you're exempt again for 2020, you'd need to submit a new W-4 by that expiration date.
How to Submit a New W-4
While you might think of a W-4 form as something you fill out once when you're hired and forget about, the IRS actually allows you to submit a new W-4 form at any time. To ensure that your employer doesn't take too little or too much federal income tax out of your paychecks, it's a good idea to fill out a new W-4 form to give to your employer when your tax or job situation changes.
These changes can include getting married or divorced, taking on or quitting a second job, gaining or losing a dependent, or becoming eligible for credits like the Child Tax Credit. If you end up with a big tax bill or refund when you file, this also indicates you should adjust your withholding allowances to have just the right amount of tax taken out. You'll also need to submit a new W-4 if your exemption from tax withholding has expired.
Before you go fill out a new W-4, you can use the IRS Withholding Calculator to get advice on whether it's necessary for your situation. If so, you'll want to submit that new W-4 as soon as you can.
- IRS: Form W-4 (2019)
- IRS: IRS Withholding Calculator
- IRS: Topic Number 753 - Form W-4 – Employee's Withholding Allowance Certificate
- Investopedia: How to Fill Out Your W-4 Form
- Investopedia: The Purpose of the IRS W-4 Form
- IRS: Forms, Instructions & Publications
- IRS: Publicastion 15, (Circular E), Employer's Tax Guide for Use in 2019