Explanation of Filling Out a W4
The Internal Revenue Service requires employers to give new hires a W-4 form to complete. The form is a valuable tool in calculating federal income tax, which is based on the employee's filing status, income, wages and the IRS withholding tax tables (IRS Circular E). To ensure that the appropriate amount of federal income tax is withheld from each of your paychecks, you must complete the W-4 properly.
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Purpose
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Your W-4 helps your employer to figure your federal income tax amount. Without the form, it can be difficult for your employer to know your withholding conditions since they vary by employee. The IRS gives you a certain sum for each allowance you claim on your W-4 form. Your employer subtracts your allowance sum from your gross income to arrive at your taxable income. Along with your allowances, your filing status determines the tax bracket you should be placed in. Filing as single, for example, generally places you in a higher tax bracket than filing as married or head of household. If you do not submit a W-4 form, your employer can withhold at the highest tax bracket of single with zero allowances.
Personal Allowances Worksheet
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The top portion of the first page of the W-4 is the Personal Allowances Worksheet. Complete lines A through G based on your personal and financial situation. For example, claim one for yourself on line A if no one else can claim you as a dependent; one if you are single and have only one job on line B; one for your spouse on line C; one of each of your dependents, such as children that you support on line D; one if you will claim head of household filing status on your tax return on line E; one if you meet the minimum dollar amount for dependent care expenses on line F; one or two for each eligible child under the Child Tax Credit program on line G; and put the total of lines A through G on line H. Keep the worksheet for your records.
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Withholding Certificate
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Complete the bottom portion of the second page -- the Employee's Withholding Allowance Certificate. Include your filing status on line 3 and your total allowances from line H of the Personal Allowances Worksheet on line 5. If you want additional federal income tax withheld from each of your paychecks, put the amount on line 6. If you meet the criteria for exempt status, write "exempt" on line 7 -- in this case, no federal income tax will be deducted from your paychecks. Sign and date the W-4. Give the withholding allowance certificate to your employer.
Considerations
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Fill out the second page of the W-4 form if you intend to itemize your deductions, such as home mortgage interest and medical expenses, and/or if you have multiple jobs or if you and your spouse's total combined earnings exceed the amount stated on line H of the Personal Allowances Worksheet. You can use the IRS withholding calculator to determine if you need to give your employer a new W-4. The calculator helps you to avoid overpaying or underpaying federal income tax.
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