Everything You Need to Know About Filling Out a W-4 Form
Because tax season is right around the corner.
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There are plenty of costly mistakes you can make at the office, like spilling your latte all over your laptop (not that we’d know anything about that though). But, one of the most expensive mishaps you can make is incorrectly filling out your Form W-4. Fortunately, it’s also one of the easiest mistakes to avoid.
We spoke with two tax experts to find out how you can keep from making a huge mess out of your taxes, and get some tips on the best way to fill out your W-4.
What is a Form W-4?
The Form W-4 is a tax tool the Internal Revenue Service (IRS) uses to gather much of the same information they ask for on your tax return. However, unlike your tax return, the information on your W-4 can be updated at any time. It asks you to declare things like your filing status, non-employment income, deductions, and the number of dependents you’ll claim. It also tells the government how much money they should be withholding from your paycheck. “The W-4 also allows you to request additional withholdings for each pay period,” Kathy Pickering, chief tax officer of H&R Block, tells HelloGiggles. It can be a bit complicated to fill out though, since things like having more than one job, changing jobs during the year, or being married to a spouse who also works outside the home can change your tax liability.
When do you need to fill out a W-4?
There are a few times in your life when you’ll need to fill out a W-4, Colleen McCreary, chief people officer and financial advocate of Credit Karma, tells HelloGiggles. “When you start a new job, your employer is required to have you complete a W-4,” she says.
The IRS recommends you to review and update your W-4 if you’ve experienced any major life events like getting married or having a child. You should also update your form if you’ve realized that you’ve had too much or too little withheld during the previous tax year, or if you’ve received a significant raise or bonus. (Congrats, by the way! But Uncle Sam still wants his cut.) These changes directly affect how much money you take home each payday, so it’s better to update your W-4 sooner rather than later. McCreary says you should talk to your company’s payroll department to find out how to update your withholdings.
What information will you need to complete your W-4?
If you know you’ll be completing a new W-4 the next time you’re in the office, you’ll want to make sure you have personal information like your name, address, filing status, and social security number on hand. “Be sure the name you provide matches the one on your Social Security card—if it doesn’t, you might not get credit for your withholdings,” warns McCrary. You’ll also need to be prepared to address whether you have additional jobs or file jointly with a spouse who also works. “If you want help figuring out your withholding amount, the IRS offers an online Tax Withholding Estimator,” McCreary says. “The withholding calculator can also give you an idea of whether you’ll owe or get a refund based on the amount you’re currently having withheld and the amount of tax you owe for the year.” While using the estimator should work for most taxpayers, those with more complex situations (like freelancers, those also collecting income from investments or retirement benefits, and gig workers) should really consider talking to a professional.
How to fill out your W-4.
There are five steps when it comes to filling out your W-4, McCrary says. If you’re going to fill the form outside of your home, you’ll want to make sure you have everything you need on hand, or else you run the risk of having to send frantic text messages to everyone from your mom (“What’s my Social Security number?!”) to your spouse (“Exactly how much is your salary? Like, exactly?”).
Your first step is going to be entering all of that personal information we mentioned prior (like your name, address, and Social Security number.) If you’re recently married, or have changed your name, you’ll need to use whatever is on your Social Security card (and make a note to update your info ASAP).
This is where you’ll need to complete the section for additional earnings or earners on your tax return (like your spouse or second job). The good news is that you only need to complete this section if you have something to report. Otherwise you can move onto the next section.
Next comes the tricky part: claiming dependents. You can claim anyone you’re financially responsible for under the age of 19 for non-students (up to the age of 24 if they’re in college), or a qualifying relative who you’re at least 50 percent responsible for financially supporting. Just note, these individuals have to have limited earnings to qualify. Meaning if you care for your younger sister who is collecting disability income, you can likely claim her. Your older brother who sleeps on your couch while he and his wife are separated is another story.
If you had other earnings to claim in step two, you’ll only need to complete step three for one of those jobs, according to McCrary. “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 do qualify for the credit, it can directly reduce the amount of taxes you owe, which means more money in your pocket. You’ll have an opportunity in the next section to make other adjustments.
If you have other income like interest, dividends, or retirement income, this is where you can enter it. “This section is optional and includes just three lines to fill in,” McCrary says. You can also choose to adjust your withholdings if you’d like to withhold more than necessary, a step some taxpayers choose as a forced savings account (as in, the government holds onto your money so it doesn’t sit there tempting you in your savings account).
You’re almost done! All you have to do now is sign your W-4 to attest to the IRS that you completed your W-4 as thoroughly, accurately, and honestly as you could.
What to do if there’s a problem.
Completing the form in a way that gets your withholdings right requires some effort, according to Pickering. “The better you estimate your income and deductions for the year, the lower the chance that you will have a ‘refund surprise’ when you file your tax return,” she says. And if you don’t like what happened with your refund this tax season, says Pickering, you can make sure it doesn’t happen again next year by updating your withholding with your employer as soon as possible. “You have nine months of the year to have those changes in effect,” Pickering adds. If you think you need to make changes, you should contact your human resources department to find out where to send your updated form.