Every employee has to fill out Form W-4 to determine how much money their employer will withhold from their paycheck. Form W-4 provides your employer with your filing status, the number of dependents you have (if applicable), and the tax credits and deductions that you intend to claim when you file your return.
In 2020, the Internal Revenue Service (IRS) issued a revised version of the form that is meant to increase transparency, simplicity, and accuracy. That version remains in place in 2022, the year in which you'll file your 2021 tax return. Learn more about Form W-4 and how it will impact you this tax season.
What Is Form W-4?
Previously called the “Employee’s Withholding Allowance Certificate,” Form W-4 is now called the "Employee's Withholding Certificate" and was redesigned to reflect that you can no longer claim personal or dependency exemptions. The form consists of five sections, and while you’re only required to complete sections one and five, completing additional sections can help your employer more accurately determine the appropriate amount to withhold from your paycheck.
Who Uses Form W-4?
Your employer uses the information you enter on Form W-4 to determine what percentage of your pay should go to income taxes. All employees receive this form if taxes are to be withheld from their pay, regardless of whether they work full- or part-time.
Freelancers and independent contractors should complete and submit Form W-9 because taxes aren’t withheld from payments made to them. They’re responsible for making their own estimated quarterly tax payments, using Form 1040-ES, in lieu of withholding.
Several factors influence the amount of income tax that’s withheld, including your filing status and how many dependents you have. For example, your employer would withhold more to cover your tax liability if you’re single with no dependents than if you’re married, or if you’re head of household with one or more dependents (assuming all other information is identical). Having more withheld means a smaller paycheck.
Your employer also withholds additional money to pay your Federal Insurance Contributions Act (FICA) taxes, which covers Social Security and Medicare. Social Security and Medicare taxes are statutory percentages, however, and aren’t impacted by the information you include on the W-4.
Types of W-4 Forms
|Form||What It's Used For|
|Form W-4||Calculating withholding from salary and wages|
|Form W-4 (SP)||For use by Spanish-speaking employees|
|Form W-4P||Calculating withholding from pensions and annuities|
|Form W-4S||Calculating withholding from sick pay|
|Form W-4V||Calculating withholding from government payments|
In 2022, there is one version of Form W-4 that employees would have filled out when they first started work at a company. Again, this is the form employers use to calculate withholding from salary and wages.
Employees who already have a W-4 on file from previous years don’t need to complete another form unless they want to change their withholding. In that case, they must use the revised form, as must all newly hired employees.
Form W-4 (SP)
Form W-4 (SP) is a Spanish version of the standard W-4. Aside from the change in language, the form is exactly the same as Form W-4.
Individuals would use Form W-4P if they are recipients of pensions, annuities, and certain other deferred compensation. You should submit this version of the W-4 if you want your plan administrator or employer to withhold taxes from a pension or annuity.
Your employer might ask you to complete this version of the form if you also want withholding from any sick pay, to which you're entitled.
This form is submitted to a third-party payer of your sick pay, such as an insurance company. If filled out, Form W-4S will allow federal income tax to be withheld from these payments.
If you receive government payments, such as Social Security or unemployment income, you can use this voluntary form to ask the payer to withhold federal income tax.
Where To Get Form W-4
Your employer should provide you with a blank Form W-4 to fill out, along with its accompanying worksheets. You can also download the form from the IRS website's "Forms and Publications" page.
How To Fill Out and Read Form W-4
Form W-4 actually consists of a series of questions and instructions grouped into five steps. The instructions and worksheets attached to the W-4 form guide you through the steps.
- Step 1 (REQUIRED): This is where you’ll enter your name, address, Social Security number, and tax filing status.
- Step 2: This step takes into consideration extra income from other jobs and/or your spouse’s job if you’re married and filing a joint tax return.
- Step 3: This step is used to estimate credits you receive for dependents. You can include the amount of other credits you anticipate receiving as well, such as education credits. Completing this step will reduce your withholding.
- Step 4: In this step, you can include extra income (not from other jobs or self-employment) from which tax isn't withheld—this will increase your withholding. You can also include how much you intend to claim in deductions other than the standard deduction—this will decrease your withholding. If you want a specific additional amount withheld from your paycheck, you can indicate it in this step as well.
- Step 5 (REQUIRED): This is where you sign the form.
The IRS also offers an interactive W-4 withholding calculator on its website. The calculator automatically makes adjustments if it appears that you’re eligible for tax credits, and it accommodates more than one income if you’re married and planning to file a joint return.
About Step 4
Step 4(c) allows you to request extra withholding above what would normally be withheld from your pay, or to reduce withholding if you expect the deductions you claim to exceed your standard deduction.
You might increase how much is withheld if you owed the IRS money when you last filed your return. For example, you could divide the amount you owed by the number of pay periods remaining in the year to avoid a future tax bill. If there are 36 pay periods left in the tax year and you owed $3,000 last year, you could submit a new W-4 to have your employer withhold an additional $84 from each of your paychecks.
This option should only be used as a quick fix and a temporary remedy until you get your W-4 completed correctly, which you should do as soon as possible.
If, on the other hand, you want less withheld because you anticipate getting a refund, you can use step 4 to indicate the additional deduction amount you expect to claim (over and above the standard deduction for your filing status). With this information, your employer can calculate a new withholding amount that would leave more in your paycheck, but would reduce or eliminate your tax refund.
If You’re Exempt From Withholding
If you’re exempt from tax withholding, Form W-4 provides a space you can use to indicate that. First, confirm that you are exempt by reviewing Form W-4 instructions under “Exemption from withholding.” You are exempt for the 2021 tax year if:
- You had no federal income tax liability in 2020
- You expect to have no federal income tax liability in 2021
Then, write "Exempt" in the space below Step 4(c), and complete steps 1(a) and 1(b) and step 5. You must complete and submit the form even if you're exempt.
Check with a tax professional before claiming exemption to make sure you meet the qualifications. Otherwise, you could owe a penalty. If you are exempt, you'll have to redo your W-4 each year to indicate that you qualify as exempt for that particular tax year.
How To File Form W-4
You don't have to file Form W-4 with the IRS. Simply complete it and give it to your employer. You must do this when you begin working for the company, but you can also submit a new one if your circumstances change or you otherwise want to adjust your withholding.
Benefits of Form W-4
Through tax year 2017, you could claim withholding allowances to reduce the amount of federal income tax withheld from your wages. These allowances were tied to the personal exemption that was eliminated under the Tax Cuts and Jobs Act. The IRS, therefore, instituted a revised Form W-4 in 2020 that discontinued the use of allowances and simplified the process of filling it out. This remains in place for tax year 2021.
- Form W-4 indicates how much your employer should withhold from your pay based on information you provide.
- There are several types of Form W-4, including Form W-4 (SP), Form W-4P, Form W-4S, and W-4V.
- You may owe a penalty if you pay too little in taxes throughout the year.
- Form W-4 was redesigned in 2020 to make it more transparent and easier to complete.
Frequently Asked Questions (FAQs)
What's the difference between W-2 and W-4?
Employees use Form W-4 when they start working for an employer, while Form W-2 summarizes your earnings throughout the tax year. You use your Form W-2 to file your tax returns every year.
How do you fill out the W-4 to get more money?
If you can claim more dependents or other tax credits, you will have fewer taxes withheld, and the amount of each paycheck will increase. In exchange for larger paychecks, your potential for a tax refund will decrease. If you incorrectly claim credits you shouldn't have, then you may have to pay more taxes when you file your returns.
Internal Revenue Service. "FAQs on the 2020 Form W-4."
Internal Revenue Service. "(Circular E), Employer's Tax Guide," Page 21.
Internal Revenue Service. "Topic No. 751 Social Security and Medicare Withholding Rates."
Internal Revenue Service. "About Form W-4 P, Withholding Certificate for Pension or Annuity Payments."
Internal Revenue Service. "Form W-4S Request for Federal Income Tax Withholding From Sick Pay."
Internal Revenue Service. "W-4 Employee’s Withholding Certificate," Page 1-2.
Internal Revenue Service. "FAQs on the 2020 Form W-4," Question 2.
Internal Revenue Service. "About Form W-2, Wage and Tax Statement."