How To Fill Out Form W-4

A Step-by-Step Guide to Form W-4

The Balance

You see it with every paycheck—your net income is whittled away as your employer takes federal and state taxes out of your gross pay. He withholds the money then sends it to the government on your behalf, and in the case of Social Security and Medicare, he matches what you pay. 

So how does your employer know how much to withhold? You tell him.

That Magical Form W-4 

Tax forms aren't generally considered to be good things, but Form W-4 at least gives you a little control over your tax situation and how much pay you take home.

Form W-4 tells your employer how many allowances you want to claim. You're asked to fill out a Form W-4 whenever you first start a new job, and you can also submit a new W-4 at any time during the course of your employment if you want to change your withholding allowances. These allowances adjust the portion of your income that's subject to federal income tax.

Where to Get the Form If You Want to Make Changes

Your employer should give you Form W-4 to complete when you first begin working for him, but you can download it from the IRS website if you want to make changes and he doesn't happen to have the form on hand.

It's in PDF format. You can type your information directly into the document then print it out or print it out and fill it in by hand. It’s a good idea to keep a copy on your computer as well.

Save a copy to your hard drive when the PDF loads on your Web browser, then open the downloaded file and type in your information that way. You can save the finished draft after you've filled it out.  

The Worksheets 

Look over the pages of the form to familiarize yourself with it. There are some brief instructions on the first page followed by the form itself. More instructions appear on the second page, followed by a Personal Allowances worksheet and the Deductions, Adjustments and Additional Income worksheet. Finally, there's the Two-Earners/Multiple Jobs worksheet with two related tables. 

Worksheets are good things, too. They help you figure out what you should enter on the form. 

Calculating Personal Allowances 

Start with the Personal Allowances worksheet and complete lines A through H. The questions relate to the current tax year, and they're pretty black and white. How many dependents do you have? Will you be filing your taxes as head of household?

This worksheet also asks you about some tax credits that you might be eligible to take that can have a significant impact on your tax liability at the end of the year. Credits can also influence how much should be withheld from your paycheck.

If you anticipate taking the standard deduction and personal exemptions only with no other deductions, you can transfer the resulting number on line H to line 5 of the W-4. 

Will You Have Other Income? 

If you anticipate that you'll also have unearned income or self-employment income, or if you think you'll claim adjustments to income or that you might itemize your deductions, continue on to the Deductions, Adjustments and Additional Income worksheet. 

Work through lines 1 through 10. You might need the help of some worksheets found in IRS Publication 505, "Tax Withholding and Estimated Tax", to complete some calculations.

You might also have to refer to your tax return from the previous year to help you estimate non-wage income, adjustments to income, or itemized deductions.

Are You Married or Do You Have More Than One Job? 

The Two-Earners/Multiple Jobs worksheet is for unmarried persons with more than one job, and for married couples who both work and who plan to file jointly. Complete lines 1 through 9 of this worksheet. You might have to refer to the tables that appear below it for help. 

Cross-Check Your Results 

Now you have a number that represents your withholding allowances. You can cross-check this number if you want to see if it provides for the right amount of withholding for you.

Start with the exact amount of money that will be withheld every pay period using the withholding allowances you just calculated. You might have to use an online payroll calculator and you'll need a current pay stub. 

Figure out how much federal income tax will be withheld using the payroll calculator and the withholding allowances you just calculated. Now multiply that number by the remaining pay periods in the year and add in how much federal tax has been withheld from your pay so far this year. The result is your expected federal tax withholding for the year.

Calculate Your Expected Tax Liability for the Year 

Compare your expected federal tax withholding to your expected tax liability for the full year. You can calculate this by using worksheets in Publication 505 or the tax-planning feature of your tax software.

Now you can figure out if your withholding for the year will be more than your tax liability—which will result in a refund—or less than your tax liability, which means you'll owe a balance to the IRS. Now you can adjust your withholding up or down to bring your expected refund or balance due within a range that's acceptable to you.

You might prefer not to wait for that refund but have the difference appear in your paychecks instead, or you might want to pay more taxes per pay period than you have to just to be on the safe side. If insufficient money is withheld from your pay, you could find yourself facing an unexpected tax bill at year's end. 

Give the Form to Your Employer 

Fill out the rest of the Form W-4 and give it to your employer. If you're starting a new job, he'll use this information to calculate the tax withholding on your first paycheck.

If you're submitting a revised Form W-4, your employer should make the changes as soon as possible. Technically, the deadline is the start of the first payroll period that ends 30 or more days after you turn in the W-4.

Don't neglect to review your paycheck after your withholding allowances go into effect. Remember, you're trying to achieve that perfect balance between withholding enough so you don't have a tax liability at the end of the year and still having enough take-home pay to live comfortably. 

If You're a Nonresident Alien 

There's a special procedure for filling out Form W-4 if you're a nonresident alien.

Refer to the Special Instructions for Form W-4 for Nonresident Alien Employees on the IRS website, or ask a tax professional for assistance.