How to Set Up a W-4

by Grace Ferguson
Complete your W-4 properly to avoid overpaying and underpaying federal income tax.

Once you take a job, you must arrange to ensure that Uncle Sam gets his cut -- in taxes. Workers should fill out a W-4 form so that employers know how much federal income tax to take out of wages. If you fail to submit the form, your employer must withhold federal income tax at the highest tax bracket of single filing status with zero allowances.

Read the "Personal Allowances Worksheet" section of the W-4 for a general understanding of your allowance choices. Each allowance gives you an amount that decreases your taxable wages and withholding amount. Claim only the allowances for which you qualify.

Select your allowances for lines A through C. For example, if no else can claim you as a dependent on their tax return, put “1” on line A. If you’re single with only one employer, write “1” on line B. Enter “0” on line C if you’re not married.

Enter your allowances for lines D through G. For instance, if you have one child, who you will claim on your tax return, write “1” on line D. If you contribute more than 50 percent toward the cost of supporting a home for yourself and your child, claim “1” on line E. Write “1” on line F if you incurred no less than $1,900 in child care expenses, excluding child support payments, and intend to claim a credit on your tax return. On line G, go through the income brackets and claim the number of allowances given for each eligible child for child tax credit.

Add your allowances on lines A through G and write the total on line H.

Fill out the "Employee’s Withholding Allowance Certificate." After writing your personal information, select your marital filing status on line 3. Transfer the total number of allowances from line H of the "Personal Allowances Worksheet" to line 5 of the withholding allowance certificate. Sign and date the certificate before giving it to your employer.

Claim “Exempt” on line 7 of the withholding allowance certificate only if you meet the requirements. To qualify for exempt, you must not have owed any federal income tax in the past year and must have received a full refund as a result. You must also expect the same outcome for the present year. When claiming exempt, put your filing status on line 3, but do not claim any allowances on line 5.

Complete page 2 of the W-4 if you plan to claim credits or adjustments to income on your tax return. Or, fill it out if you’re single with multiple jobs, or if you and your spouse both have jobs and meet the income bracket stated on line H of page 1. If you will claim credits or income adjustments, put the number of allowances, which are the result of your calculation on page 2, on line 5 of page 1. If you filled out the "Two-Earners/Multiple Jobs" worksheet on page 2, your calculation may result in an additional withholding amount, which should go on line 6 of page 1.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

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