What Is the IRS W-4 Form?

IRS Form W-4 Explained

Young man calculating his taxes by hand on the living room floor
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IRS Form W-4 is filled out by employees to provide their employers with the information they need to withhold the correct amount of income tax from their pay. You can adjust how much is withheld by changing your Form W-4 if you work for an employer that withholds taxes from each paycheck and remits them to the IRS on your behalf.

The information you provide on the form can mean the difference between getting a refund at the end of the year or receiving a tax bill.

What Is the W-4 Form?

Form W-4 is the "Employee's Withholding Certificate." The 2020 version of the form includes five steps, but you don't have to complete all of them if your tax situation is relatively simple. You can simply fill out the first step and sign the form if you're not likely to itemize on your tax return, have no dependents, and hold down only one job.

2020 IRS Form W-4

The form was changed for the 2020 tax year to align with changes to the tax code made by the Tax Cuts and Jobs Act (TCJA). Specifically, the TCJA eliminated personal exemptions—dollar amounts you used to be able to subtract from your taxable income for yourself, your spouse, and each of your dependents.

Form W-4 used "allowances" to determine your withholding before 2020, and these allowances were linked to the number of personal exemptions you would claim at tax time. The IRS therefore revised the form to ask a series of questions about your tax situation instead, and your answers and calculations will determine your withholding.

Your employer will simply base your withholding on your selected filing status if you complete only Step 1 of the Form W-4 and sign it.

Who Uses Form W-4?

Most people fill out the W-4 form when they first start a job. It's possible you didn't pay that much attention to your election choice at the time you first filled out the form—many people don't. You can review your elections at any time, especially if you've experienced any big changes in your life.

You don't have to fill out a 2020 Form W-4 for your employer if you've worked there for a while and already have a W-4 from a previous year on file with them. Your employer can still use the information on that form. New hires must complete a 2020 Form W-4, however.

Certain events or even moving to a different state can affect which W-4 elections suit you best and whether you end the year in a good place tax-wise. Several different circumstances can trigger a need to change your withholding:

  • Having a child
  • Getting married or divorced
  • Buying or selling a home
  • Having an older child who is no longer able to be claimed as a dependent
  • Changes in retirement or college savings contributions
  • Changes in employment

All of these events can play an important role in your tax situation. Some might require that you pay more taxes, while others may entitle you to additional tax breaks, reducing your tax burden.

Types of Form W-4

Some states have their own W-4 forms or the equivalent, while others use the federal form. The W-4 will take care of your federal tax withholding, but check with your employer or human resources to find out if you must complete a state form as well.

Where to Get Form W-4

Your employer should provide a W-4 form for you to complete and submit, but you can also download one yourself from the IRS website.

How to Read and Use Form W-4

Step 1 of Form W-4 is for your personal information: your name, address, Social Security number, and filing status. Your employer will withhold based on your filing status if this is the only step you complete.

You can move on to Step 2 if you work more than one job or if you're married and your spouse also works. This section provides an online link to an IRS Withholding Calculator that will effectively calculate your withholding for you in cases where you have multiple sources of income. The Form W-4 packet also includes a Multiple Jobs Worksheet you can complete by hand.

Step 3 is where you can make adjustments for any dependents you're going to claim, and Step 4 allows you to adjust for other income sources you have from which taxes aren't withheld. You can also use this section if you'll be itemizing deductions rather than using the standard deduction at tax time. You can complete the Deductions Worksheet to arrive at the correct information to enter here.

You can also use Step 4 if you want your employer to withhold extra, but you don't want to share your reasons why. You might not want your employer to know you have a side gig or you're otherwise working a second job. Simply enter the amount you want withheld on line 4(c) in this case.

Finally, sign and date the form in Step 5.

Benefits of Form W-4

Perhaps you're having too much withheld from your paychecks if you had a sizeable refund last year. Or maybe you were surprised to find out that you owed the IRS money when you completed your return. You didn’t have enough tax withheld from your paychecks in this case, and you might even owe a tax penalty. Completing Form W-4 correctly avoids both scenarios.

Your goal should be to strike a balance so that you receive little or no refund. If you’re withholding more than necessary, you’re taking money out of your pocket each paycheck and giving the IRS a free loan...and the IRS doesn't pay interest.

Key Takeaways

  • Form W-4 is the "Employee's Withholding Certificate." It provides your employer with the information it needs to correctly calculate income tax withholding from each of your paychecks.
  • The IRS extensively revised the form for the 2020 tax year, eliminating the allowances that were once used as the basis for calculations.
  • The 2020 Form W-4 allows employees to simply answer some questions and walks them through completing some worksheets instead of calculating allowances.
  • Employees can update their Forms W-4 whenever they experience significant life changes that will affect their tax situations.

Article Sources

  1. IRS. "FAQs on the 2020 Form W-4." Accessed July 6, 2020.

  2. SHRM. "IRS Overhauls Form W-4 for 2020 Employee Withholding." Accessed July 6, 2020.