A Step-by-Step Guide to Help you Fill out the New 2023 W-4 Form
The W-F Employee’s Withholding Certificate – also known as the W-4 Form – is an important tax document. If you are worried about filing tax forms and are afraid you’ll make a mistake, don’t worry. The government changed the W-4 recently, so it’s easier to fill out. Please keep reading for our guide on the W-4 Form and how to file it.
What is the W-4 Form?
A W-4 form is an important form you file upon getting a new job. The Form ensures that an employer withholds the right amount of income tax from your paycheck. Arranging for your employer to set aside some of your payments for taxes makes it easier for you and ensures everyone pays their fair share. It’s better you talk with your tax pre-payer or accountant before filing the Form if you have one.
What Is Form W-4 Used for?
How you fill in your Form determines how much tax an employer takes out of your paycheck. Your employer sends the money to the Internal Revenue Service (IRS) along with your name and social security number. The withheld money counts towards your annual income tax when you file for your tax return.
The Form is used to keep track of how much people have prepaid taxes. You may claim exemption to your money being withheld if you didn’t owe any tax in the previous year and are unlikely to owe taxes this year.
Why do I have to complete the Form W-4?
You have to file the W-4 Form because it’s essential to pay the right amount of tax. The IRS takes an appropriate amount of money from your income over the year. If you don’t have enough tax money withheld, you’ll get a surprisingly large bill come during tax time. You may also face penalties for underpaying taxes.
On the other hand, it’s also harmful to withhold too much money. This means you’ll have less money than you should. You’re basically giving the government more money than they deserve from you, and you won’t get that money back until you file your taxes. That’s when you get your tax refund. However, the money you get from your refund feels like “free money” you can do anything with it. It’s better to have more money over the course of the year and spend it wisely.
If you fail to fill out the form entirely, the IRS requires your employer to withhold money on the assumption you are single, and there are no other adjustments to be made. You can either file the Form so the appropriate amount is taken or leave it and risk underpaying or overpaying your taxes – both of which have adverse outcomes.
How to Read and Fill Out Form W-4: A Step-By-Step Guide
Filing the W-4 Form is relatively straightforward, depending on your circumstances. There’s no special actions needed if you are single, married to someone who doesn’t work, don’t have any dependents, have just one job, and aren’t claiming tax deductibles or tax credits. All you’ll have to do is include your name, address, Social Security number, and filing status. Sign the Form and write the date and send it off and you’re done.
You’ll need to include as much information as necessary. For example: information about dependants, spousal income, additional income from other sources, and any deductibles and credits you’ll claim. Here’s a full step-by-step guide to completing the Form.
- Fill In Your Information
Write your name, address, status, and Social Security number into the appropriate fields. This is the easiest step. You have to include your Social Security number so that when money is sent on your behalf, the government applies it appropriately towards your tax bill and no one else’s. If you’re single and have only one job and an uncomplicated tax situation, you can sign and date the form and file it. If not, then move on to step two.
Remember, if you don’t file the form, your employer automatically withholds the highest amount of money.
- Include Other Jobs and a Working Spouse
You have three options to choose from if you have two or more jobs or are filing jointly with a partner who also works.
- Option A
Use the Tax Withholding Estimator available on the IRS website and enter the estimated amount on the Form.
- Option B
You can file the Multiple Jobs Worksheet, which is included on page three of the Form. You can download the form directly from the IRS website if your employer doesn’t give you a copy. The IRS advises that you file the sheet on one Form and that you enter the Form for the highest paying job only so that you get the correct withholding amount.
When filling in the Multiple Jobs Worksheet, please differentiate between having two jobs (including one job each between you and your spouse) or having more than two jobs. If you have one job each, then you need to complete line 1 of the Form. You’ll also have to fill in this line if you have two jobs and your spouse doesn’t work.
You can consult the graphs on page four of the Form to accurately fill in line 1. The graphs are organized by filing status, so you’ll have to find the right graph for how you’ll file the taxes. The left column includes dollar amounts for the spouse earning the most money. The top of the chart lists how much the lower-earning person makes.
If you and your partner have three jobs or more between you, you’ll have to file the second part of the worksheet. Start by entering your highest and second-highest paying jobs. Refer to the graphs on page four to calculate how much to add to line 2a on the third page. This is similar to the previous step, but with the second job replacing the “lowest-paying” job.
Then you include the wages from the two highest jobs. Calculate the sum to get the salary for the “highest paying job” from the graph on page four. The wages for your third job are the “lower-paying job” in the Form. Enter the number into line 2b on page three and add the numbers from 2a and 2b to get the figure for 2c.
It sounds a little complicated, so let’s look at an example. Let’s assume that Spouse A earns $50k and $15k from two jobs. Spouse B has one job and makes $40k from it. Spouse A enters $3,570 for line 2a (the intersection between the $50,000 to $59,999 row on the left and the $40,000 to $49,999 column from the top. Add 50k and 40k together to get 90k. Spouse A would then write $3,260 for line 2c – the intersection between $80,000 to $89,999 on the left and $10,000 to $19,999 on the top. Combining the two amounts gives you a total of $6,830 for line 2c.
You’ll have to write the number of pay periods per year for the highest paying job into line 3. For example, write in 12 for monthly payments or 52 for weekly payments. Take the annual amount from line 1 or 2c and divide it by the number of pay periods. Put the result in line 4 of the Multiple Jobs Worksheet and on line 4c for the W-4 Form.
- Option C
Check the box for Option C if there are two jobs and then do the same thing on Form 4-W for the other position. Choosing Option C makes sense if both jobs have a similar salary, or you might end up overpaying your taxes.
- Add Dependents
You’ll need to complete this step if you have dependents. You may be entitled to Child Tax Credits or other tax credits. You can claim Child Tax Credit if you are single and making less than $200k per year or filing together with a partner and making less than $400k combined.
What the IRS defines as a dependent can be complicated. The short answer is that it is a qualifying child or relative that lives with you and depends on your financial support.
You get $2,000 per year for children under 17 and $500 per year for other dependents. Add the numbers together and enter the total amount into line three.
- Include Other Adjustments
This section includes other things you want removed from your paycheck. The information you provide in the different areas could see your employer taking too little tax. This means you end up with a bigger bill and may face penalties for underpaying taxes. This step is divided into three sections:
Enter the amount you expect to earn from non-job-related income, such as dividends and retirement payments.
Complete this section to claim deductions other than standard deductions.
This section is for when you have other taxes you want to be withheld from your payments.
H2 — What to keep in mind when completing your Form W-4
There are several things to keep in mind when completing your Form:
- You might have different versions on file
Not everyone has to file the new W-4 Form. Only those who received a paycheck in 2020 have to use the new Form. You also have to use the new Form if you want to change something on the pre-2020 Form. You may end up keeping a few different versions of the Form on file because of this.
- There are no more withholding allowances
One significant change with the W-40 Form in 2021 is that there are no more withholding allowances. Removing the allowances came as a major shock. They were used to help determine withholding for years, so everything changes without them.
Rather than claiming allowances to reduce tax withholding, you can now claim deductions and dependents on the Form instead. Keep in mind this will take some math on your part.
- There’s going to be a learning curve involved
You likely won’t be an expert right away. There’s nothing wrong with that. It takes time to learn anything, even filing tax forms correctly. Don’t panic if you don’t get it right away. You’ll soon know what you’re doing, but there’s a curve before you get there. It may help to use payroll software or consult an expert if you’re confused.
It’s vital that you fill the W-4 Form correctly as the IRS requires you to pay income tax across the year. If you don’t get enough tax taken off, then you could be on the hook for a large tax bill and charges for underpaying taxes. On the other hand, paying too much tax is just as bad because you struggle to keep up with your bills. Read the Form carefully and follow the steps as closely as possible.