Understanding the W-4: What is the W4 and Why Do I Need One?

Page content


The IRS W-4 form is a tax withholding form that all employees must fill out and give to their employer so the employer knows how much federal income tax to withhold. You must fill out part of the form even if you are exempt from withholding or receive a 1099 at the end of the year. You can download a W-4 form at www.irs.gov/pub/irs-pdf/fw4.pdf from the IRS Website in a PDF format that allows you to fill out the form before you print it out. A new form should be filled out each year as circumstances may change.

To fill out the form properly the IRS supplies a series of worksheets for you to fill out. The first is a Personal Allowances Worksheet. To fill out this worksheet you need to know how many dependants you are going to claim at the end of the year. You will also need to know how you are going to file, such as single, married filing jointly or separately or head of household. The form adjusts if you are claiming child or dependent care expenses or the Child Tax Credit. If you itemize or claim adjustments to your income you would use another worksheet entitled Deductions and Adjustments Worksheet.

The Deductions and Adjustments worksheet is to be used only if you itemize your deductions, claim certain credits or adjustments to your income or you claim an additional standard deduction. You must estimate what your itemized deductions will be. These deductions may include charitable contributions, a percentage of your medical expenses and qualifying home mortgage interest. When you are finished with this worksheet, if you and your spouse both work or you have more than one job you will need to fill out the Two-Earners/Multiple Jobs Worksheet.

This worksheet is pretty self explanatory; you only use it if there are two or more incomes coming into the household that will be claimed on the same income tax return for that particular year. This is to make sure you are not having too much withholding tax taken out of each paycheck. There are tables to help you determine the right amount to enter into the form.

It sounds much more complicated than it actually is and only takes about 10 minutes to complete. After you start getting a paycheck and the W4 is in effect, you can see if the withholding amount is close to your projected total tax by using the IRS Publication 919. This especially holds true if your income exceeds $130,000 if you are single and $180,000 if you are married.