What is a W-4?
Essentially, a W-4 is how you let your employer know the amount that should be taken out of your paycheck for taxes. When you start a new job, you’re required to fill one out — but, you can also update them at any point. If you’re financial situation changes, such as with a marriage, divorce, birth of a child, move to a new home, etc., you may want to fill out a new form to be sure you have the money you need to cover daily expenses.
What are the sections of a W-4?
Assuming you’re not exempt from taxes (again, consult a tax professional if you are not sure about your status as exempt or not), the first section you’ll fill out is the Personal Allowances Worksheet. This is where you figure out how much of your paycheck you need for certain expenses, and how much should be withheld for taxes. Here’s a breakdown of what information you’ll need:
- In Line A, you enter 1 if no one claims you as a dependent.
- If you’re single or married and only have one job between you and your spouse, you’d enter 1 for Line B. You also enter 1 if you’re single or married with a second job with a wage of $1,500 or less.
- Enter 1 in Line C if you have a spouse; however, you may enter 0 here if your spouse works or if you have two jobs.
- If you claim any dependents, enter the number of dependents in Line D.
- If you file as Head of Household, enter 1 in Line E. (Unsure if you should file as Head of Household on your taxes? Efile’s got a Head of Household Calculator for you!)
- If you plan to claim a tax credit for $2,000 in expenses for child or dependent care, enter 1 for Line F.
- Line G is also for people who claim child tax credits. If you make less than $70,000/year ($100,000/year if married), you would first add 2 for each dependent; then, subtract 1 if you have two–four eligible children or 2 if you have five or more eligible children. If you make $70,000–$84,000/year ($100,000–$119,000/year if married), you will simply enter 1 for each eligible child.
- In Line H, add up all the numbers for Lines A-G. This is your number for allowances!
The higher the number in Line H, the more allowances you have, and the less will be withheld for taxes. Entering 0 on a line means there are daily expenses you don’t need to cover, so more will be withheld for taxes.
For a more accurate calculation of your allowances, you may also complete the two worksheets on the second page of the W-4. If you plan to itemize deductions or claim certain credits or adjustments to income on your taxes, you can fill out the Deductions and Adjustments Worksheet. If you’re single and have more than one job, or if you’re married and you and your spouse both work with combined earnings of over $50,000 ($20,000 if married), you can fill out the Two-Earners/Multiple Jobs Worksheet.
After the Personal Allowances Worksheet is the section you’ll give to your employer. Lines 1-4 include your personal information. Lines 5–7 include:
- The total amount calculated in Line H, or from the Deductions and Adjustments Worksheet if you used that
- The total amount calculated in the Two-Earners/Multiple Jobs Worksheet, if you used that
- Whether you’re exempt from taxes
What’s the point?
The amounts you fill out on your W-4 will impact how much of your paycheck is withheld in taxes. Again, the higher the number, the less is taken out of your paycheck for taxes. So it’s good to be as accurate as possible. If your total is smaller than what you actually need, you may have a larger refund come tax season, but you might find yourself unable to afford day-to-day costs. If your total is more than what you actually need, you’ll be taking home a larger monthly paycheck, but you might find that you owe the IRS more money during tax season.