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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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W-4 Form

What Is a W-4 Form?

The IRS form W-4, Employee's Withholding Allowance Certificate, is a form that lets employers know how much federal tax to withhold from an employee’s paycheck. Employees can also use this form to withhold extra from their pay. This is useful if a person works more than one job, has self-employment income, or if a spouse earns income as well.  

What Is a W-4 Form Used For?

The W-4 is used to withhold the right amount of taxes from paychecks. The goal is to prevent individuals from either having a big balance due at tax time or overpaying taxes so they have less take-home pay. Employees fill out a W-4 and select the number of allowances; the more allowances, the fewer taxes are withheld.  

Because the IRS requires people to pay taxes on their income gradually throughout the year, it’s important to complete the W-4 form correctly. If an individual doesn’t have enough tax withheld from their pay, they could owe a large sum to the IRS when filing taxes in April, plus interest and penalties for underpaying taxes. If no W-4 is submitted for an employee, the employer must withhold at the highest rate.  

The W-4 form can also be used to declare that a person is exempt from withholding. This means an employer will not take out any federal income tax from paychecks. Exemptions can be claimed if a person did not owe tax in the prior year and expects to have zero tax liability in the current year.

How Do I Fill Out Form W-4?

The W-4 form comes with a series of worksheets to calculate the appropriate amount of allowances to claim. The form asks for personal information: name, address, social security number, marital status, and any name changes (for example, if someone got married).

Another section of the form asks for the total number of allowances being claimed. The Personal Allowances Worksheet can help an individual determine the number of allowances to claim. In addition, this section includes information if a tax situation is more complicated: an employee has more than one job, their spouse works, or they itemize deductions on their tax return. 

The W-4 also asks if there are additional amounts to be withheld from a paycheck. Employees will withhold additional taxes if they receive significant income from sources like interest, dividends, or self-employment income (reported on form 1099). The final section is used if the employee wishes to claim exempt status from withholding. 

How Many Allowances Should I Claim on a W-4?

A withholding allowance is, in essence, an exemption from paying a certain amount of tax on your income. The more allowances claimed, the less tax is withheld. Therefore, if an employee were to claim zero allowances, the employer would withhold the maximum amount. Too many allowances and an individual will likely owe taxes; too few and they will likely receive a tax refund (and have smaller paychecks throughout the year). 

The Personal Allowances Worksheet helps the employee calculate the number of allowances. However, here are some general guidelines for the number of allowances in various situations:  

  • One allowance if no one else claims you as a dependent.

  • One allowance if you’re married filing jointly or filing as the head of household.

  • One allowance if your household only has one significant source of income (the job that the W-4 is for).

  • One allowance for each eligible child. Eligibility depends on your income and the number of children you have.

  • One allowance for each dependent you will claim on your tax return. 

  • Other certain credits, like the earned income credit or adoption tax credit, may entitle you to additional allowances.

When Do I Need a New W-4?

An employee can change their withholding at any time by submitting a new W-4 to their employer. The IRS suggests individuals regularly review their withholding situation to ensure the correct amount is being taken out of their paychecks. Other situations that may require changing a W-4 include: adding a child to the family, starting a second job, or getting married or divorced. If an employee finds that they withheld either too much or too little the previous year, they may want to submit a new W-4 as well. 

Is There a New W-4 Form for 2019?

The W-4 form for 2019 is similar to the 2018 version. However, the IRS is working with the U.S. Treasury Department to make changes to the W-4 form for 2020.

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