How to fill out a W-4

When you start a new job you will probably be asked to complete a mountain of forms.  You’re asked to present a driver’s license, social security card and other form of identification while your employer finishes the I-9 form; this Employment Eligibility Verification is a federally mandated form which gathers information that confirms your identity, and permits you to work in the United States.  Another form asks for your emergency contact name and phone number.  Many employers also require you to sign a release for a background check. Another form pertains to your health insurance plan.  You are also given some information about the 401K plan.

Immediate W-4 Witholdings

When you begin a new job you must complete the federal Employee’s Withholding Allowance Certificate, form W-4.  Additionally, each time you experience a life change such as a new address, marriage or a baby’s birth, you need to update your W-4 promptly; never wait until the end of the year to do this.  The federal W-4 is a two-sided form that’s simple to do. Most people don’t need to worry about its back side which is actually a worksheet for employees who itemize deductions, have multiple jobs, or are part of a two-income family.

The only part of the federal W-4 form that your employer needs is the bottom third of the sheet.

On item 1 of the W-4, print your full name legibly.  Box 2 asks for your social security number.   Box 3 wants your marital status.  Line 4 asks if you are known by some different last name, for example, you may be recently married with a surname change.

Line 5 can be tricky sometimes, but it’s crucial to write the correct number of allowances.

The top of the W-4 form contains a Personal Allowances Worksheet that’s somewhat self-explanatory.  In a nutshell, it gives you guidelines for what number to write on Line 5 of the W-4; this is the number of allowances you are claiming.  If you have no dependents and no spouse, you probably want to write “1” on line 5.  Many people write “0”.  That means you are likely to get a tax refund when you file your year-end income tax.  This may sound like a good idea, but it means that the IRS had access to your money all year, that you could have invested or used for yourself.  But, if you’re not much of a saver, it may be best to write “0”.  Married taxpayers filing jointly need to confer with their spouse so they’ll write the correct number on line 5.  Taxpayers with dependents generally write a bigger number than “1” depending on the number of dependents, and the number of exemptions their spouse has claimed on their W-4.

Line 6 requests additional amount you want withheld for each paycheck.  Most people write “0”.  If you expect you’ll owe a significant amount of federal taxes, you may want to calculate a dollar amount for line 6 so that you don’t owe the Internal Revenue Service (IRS) oodles of bucks at year-end.    On line 7, you’re asked to write “Exempt” if you had no tax liability last year, and expect to be in the same situation again this year.  Most people leave this blank.  Few employed people are in a position to be exempt from paying federal taxes.

A federal W-4 form is only complete if you’ve signed and dated it.  Most states have their own W-4 form to complete in addition to the federal form.   When you file your federal income tax each mid-April and the amount you owe or if the refund is relatively small, then you probably wrote the correct number on line 5. If you’re due a large refund and your situation looks similar for the next year, you probably want to write a larger number on line 5.  If you end up owing the IRS a significant amount of money, you definitely want to change line 5 on the W-4, pronto.  You can either lower the number on line 5, or fill in a dollar amount on line 6.

Complete the W-4 correctly, and you’ll avoid unpleasant surprises at tax-time.  The HR staff at work can help you.  It’s a simple task, but it must be done correctly.

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