Nowadays, most people know the W-4 form, but not everyone realizes how much power the W-4 form has on their tax bills. Beginning in January 2020, there will be a whole new look for the W-4 form, you need to fill out the W-4 form correctly so that your employer can withhold the correct federal income tax from your pay. At the same time, when your financial situation changes, you need to fill out a new W-4 form.
However, do you know how to fill out a W-4 form? You'll probably fill out a W-4 when you start a job, but you can change your W-4 at any time. So it is very important to learn how to fill out the W-4 form. Next, we will introduce what's the W-4 form and teach you how to fill it in.
Part 1 - What is A W-4?
Before you get to work, your new employer hands you a Federal W-4 Withholding Allowance Certificate. Do you feel annoyed about this form? Don't worry! We will explain what a W-4 form is.
W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is a form that employees fill out when starting a job in the United States. The form calculates the tax withholding from an employee's paychecks, depending on the number of persons in his/her household and the employee's expected filing status for that year. The W-4 form does not determine one's tax liability; one may receive a refund (or be required to pay extra) depending on his/her specific deductions, credits, and income.
W-4 is the main way for employers to obtain employee information. With W-4, employers can know how much the employee's allowance is, and meanwhile, it determines the employee's annual payroll data. W-4 will expire every year because the personal allowance of each employee may be different a year ago and a year later, so it needs to be updated every year. Of course, if the employee's individual allowance situation has not changed, then the employer can continue to use the W-4 information of the previous year. However, for new employees, they must be required to provide a new W-4 form.
Part 2 - How to Fill Out W-4
If you're filling out a Form W-4, you probably just started a new job. If you feel scared when filling out the W-4 form and worry about filling in errors, you should read this post. This section will guide you step by step to fill in the W-4 form correctly.
Step 1. Fill out the personal information that is required. You'll enter your name, address, filing status, and Social Security number.
"Pay attention to the C part, identify whether you are single or married. On the new W-4, you'll be able to choose from single or married filing separately, married filing jointly, qualifying widow(er), or head of household. You no longer have an option to choose "Married, but withholding at a higher single rate"."
Complete Steps 2-4 only if they apply to you; otherwise, skip to Step 5.
Step 2. If you have more than one job or spouse, you need to complete step 2. You have your choice of three options to calculate your withholding. They are in order from most accurate to least accurate. If you choose options A or B, you must place a dollar amount in 4C. You can use the estimator for the most accurate withholding for this step.
If you're dealing with two jobs that have similar pay, you can simply check the box on Line C of this section.
Step 3. This section is for the child tax credit and other dependents that you may be claiming on your personal tax return. You may also use this for education credits and foreign tax credits. This step should help you determine if you qualify for the child tax credit and the credit for other dependents, and if so, how much you might qualify for.
"If you have multiple jobs or are married filing jointly you should fill out this section using only the wages from the highest-earning job."
Step 4. This step is optional, only three lines are required. This part is used to report the estimated income from another source other than another job. If you have the interest, dividend, or retirement income or you plan to claim itemized deductions when you file your taxes, fill this out.
"If you are exempt from withholding, write "Exempt" in the space below step 4(c)."
What does it mean to be exempt on W-4? Employees who meet the following two conditions can claim tax exemption: 1. The employee had a right to a refund of all federal income tax withheld last year because they had no tax liability. 2. The employee expects a refund of all federal income tax withheld this year because they will have no tax liability.
Step 5. Sign your form. Sign and date the form before handing it into your employer. Your form is valid only after you sign it. When you sign this form, the information you provide must be true, correct, and complete, otherwise, you will be convicted of perjury.
1. How many allowances should I claim on my W-4?
If you need figuring your withholding allowances, you can check out the "IRS Tax Withholding Estimator" The more allowances you claim, the less federal income tax your employer will withhold from your paycheck. The fewer allowances you claim, the more federal income tax your employer will withhold from your paycheck.
2. What happens if I don't fill out a W-4?
If you don't fill out a W-4, the IRS requires your employer to withhold taxes at the highest rate, which is as a single taxpayer with no allowances for dependents. If the employer failed to withhold taxes at this rate, the IRS could penalize him.
3. What happens if I claim 1 on my W-4?
Claiming 1 will reduce the amount of your tax withheld, which means you will get more money on each paycheck instead of waiting for the tax refund before paying.
We believe that after reading this article, you can know how to fill out the W-4 form and help you better manage your taxes throughout the year. If you want to change the withholding tax, you can update W-4 at any time when you encounter a change in eligibility.
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