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4 min read

What is a W-4 Form from the IRS?

What is a W-4 Form from the IRS?

If you work in the United States, you need to tell your employer how much federal income tax to withhold from each of your paychecks.

You’ll do that by filling out a W-4 form.

A W-4 form is a short form––you can fill it out in a few minutes––where you’ll give your employer some brief information that will determine how much money they withhold from your pay for taxes.

IRS Form W4

Form W-4 cheat sheet: What you should know

  • You won’t have to fill Form W-4 out very often. You usually only need to complete the form again if you’re at a new employer or there’s been a change in your personal life (for example, if you had a child).
  • There are a few smart strategies you can use. You get to control what appears on your W-4. For example: If you’re consistently getting large tax refunds, you should reduce your W-4 withholding so that you get to keep more of your money each paycheck—more on this below.
  • It’s only tricky if you have multiple jobs or file jointly with a spouse. If this applies to you, keep reading––the process is still fairly easy.

How to fill out your Form W-4

Filling out Form W-4 is easy. Let’s walk through how to do it.

1. Fill out your basic personal information

Head to Form W-4 on the IRS website and begin filling it out. Start with your personal information––that’s the easiest part.

If you’re single or are married to somebody who doesn’t work and you make all of your income from one job, you’re done: It was that easy!

If not, keep reading.

2. Work through the multiple jobs and joint filing section.

Do you have multiple jobs, or do you file jointly with your spouse, who also has a job? If so, the IRS gives you three options on step two:

  • 1. You can use the IRS’ online withholding estimator to figure out how much tax should be withheld from your paycheck, and this is the most accurate way to estimate withholding.
  • 2. You can use the Multiple Jobs Worksheet––a page further down in the W-4 document––to get a rough estimate. This process is more confusing and less accurate than the online tool: Just use the estimator if you can.
  • 3. If there are only two jobs (e.g., you have two jobs or you and your spouse each have one), then you can check the box that says so and disregard the two options above––you’ll need to do the same on the W-4 for the other job. But be careful: If the income from both jobs isn’t similar, you may end up withholding too much.

Before we continue: If you have multiple jobs or you’re filing jointly, the steps 2 to 4 (b) on the Form W-4 should only be completed on your highest-paying job. This will help you get the most accurate withholding number.

3. Claim dependents and make other adjustments

This is where you’ll actually start filling out numbers.

First, claim your dependents: If your total income is under $200,000, you’ll claim your children and dependents.

Count how many children you have under the age of 17 (hopefully, this doesn’t take too long), then multiply that number by $2,000. Fill in the space. Then, multiple the number of other dependents by $500. Fill in that space, too.

Finally, add the two amounts and enter the total in the space provided.

Next, make other adjustments: If there’s other income that you want tax withheld from, you can note it here. And if you want to claim deductions to reduce your withholding, you can also do that here––the deductions worksheet on the third page of the document can help.

4. Sign and date the W-4

You’re done! Now, send it off to the relevant department or person at your employer. Usually, this is the payroll or HR department.

Common questions and strategies about Form W-4

What to do if you’re getting big refunds or tax bills

It’s never fun to get an unexpected tax bill in the spring. And while unexpected refunds are nice, that refund money is simply money you should have had in your bank account earlier in the year.

Neither case is good, but the solution is simple:

  • To combat big tax refunds, use Form W-4 to lower your withholding. The easiest way to do this is by increasing the number of deductions.
  • To combat big tax bills, use the form to increase your withholding. The easiest place to do this is in the space at line 4 (c). Here, you can enter the amount of tax you want withheld each pay period. Insight: Take the amount you owed extra this year, divide it by the number of pay periods you have, and enter that number in the box.

Why Form W-4 looks different than it used to

Before 2020, there were seven sections on Form W-4.

difference form w4

But in 2021, an overhaul simplified the form and reduced the number of sections to five.

What’s changed: On the old Form W-4, you could claim allowances to reduce your withholding.

Now, you’ll no longer be asked to provide a number of allowances on your W-4 form.

Instead, you’ll have to use the deductions section to decrease your withholding.

Do you need a new Form W-4 in 2021?

If the last time you filled out Form W-4 was before 2020––when it looked different––you might want to fill it out again. That’s because the system for allowances has changed and it may be easier to manage your withholdings with the new form.

Otherwise, you probably only need a new form if:

  • You’re getting big refunds or big unexpected tax bills.
  • You’ve recently gotten a new job.
  • You just got married or divorced.
  • You’ve had a kid or taken on a new dependent.
At RemotePad, Lech draws on his professional experience to write about employment taxes and payroll (both remote, and in-office). Lech holds a Bachelors’ degree from the University of Kent, a Master of Arts (MA) from Kings College London, and professional payroll and tax qualifications. He has 20 years experience advising on all manner of tax and business planning matters.