What is a W4 Form?
Also known as ‘Employee’s Withholding Certificate,’ a w4 form is an IRS form which the employees are required to fill at the time of their joining. This enables employers to determine what amount of taxes can be withheld from the employee salaries and helps in calculating payroll taxes. The employers then, basis these calculations, remit the relevant taxes to the IRS or Internal Revenue Service, on the employees’ behalf.
Name of the W4 Form
Earlier, the W4 form was known as the ‘Employee’s Withholding Allowance Certificate.’ This has now changed. This form will now be known just as ‘Employee’s Withholding Certificate.’ The reason being, the form no longer has a section for allowance calculation. That part of the form has been removed, and, the name is changed. While telling your employees to fill in the details, make sure that they download the correct form.
Personal Allowances Worksheet
When the allowance calculation section no longer exists, it is obvious that the personal allowances worksheet would no longer exist as well. This was earlier present on the third page of the old W4 form.
Another noticeable change is that the TCJA (Tax Cut and Jobs Act) eliminated personal exemptions which were deducted against the personal income of the employee, which in turn reduced their taxable income, and further, the taxes.
The new W4 form comes with two new worksheets; multiple jobs worksheet and deductions worksheet. While the former is for employees who are employed in more than one establishment, the latter is to be filled by if they want to itemize their deductions.
Old W4 Form
New W4 Form
What Does the 2021 W4 Look Like & Where Can I Download It
Now that you have your W4 Form ready to be filled out, let’s go through each step so that you can get this over with and move on with more important things in your life, like watching reruns of Buffy The Vampire Slayer, or choosing a low-cost online financial advisor to help you save and invest your money like a pro.
The first thing that you need to know, is that the easiest way to fill out the form is to use the IRS’s withholding estimator. Their calculator works best on desktop (Mac or PC) so that you can export the completed form. I’ve had less success on mobile.
Step 1: Enter your personal information.
This step is self-explanatory. The only thing that might be less straightforward is step 1c, which is where you need to select your filing status.
Your tax filing status refers to how you will file your taxes at the end of the 2021 tax year. So if you are single and don’t expect to get married this year, you’ll file taxes Single.
If you are confused about this, check your taxes from last year and see what your previous filing status was. Assuming no significant life changes occurred or are expected, you’ll likely file taxes the same way!
Step 2: Multiple Jobs or Spouse Works
The beautiful thing about steps 2 through 4 is that you ONLY need to fill them out IF they apply to you.
The easiest way to fill this step will be to use the IRS’s tax withholding estimator on a Mac or PC. Alternatively, if your household only holds two jobs in total, and both have similar pay, you can check the box for Step 2(c) and proceed to Step 3.
Step 2(b): Use the Multiple Jobs Worksheet
If you prefer not to use the estimator tool or you can’t get it to work, you can use the multiple jobs worksheet. Follow the instructions on the Form and input the final result in Step 4(c) as an extra withholding.
Step 3: Claim Dependents
Like Step 1, Step 3 is also relatively simple. If your income will be $200,000 or less ($400,000 or less if married filing jointly), follow the steps listed in the Form.
As an example, let’s assume your household income will be $300,000, you will file married filing jointly, you have three kids under the age of 17, and you also support your elderly mother financially.
Under this example, your total for step 3 will be $6,500. This is because you have three qualifying children, so 3 x 5000,000 = $6,000. You also have one other dependent, which gives you an additional $500. As a result, $6,000 + $500 = $6,500.
Step 4: (Optional) Other Adjustments
Follow the directions for Step 4(a) if you have non-job income for which you’d like to have tax withheld.
Use the Deductions Worksheet on Page 3 if you are NOT expecting to claim the standard deduction. If you aren’t sure what this means, then you are likely going to claim the standard deduction (the vast majority of people claim the standard deduction). If you aren’t sure, you can use last year’s taxes as a guide or as your accountant.
Step 5: Sign Here
Step 5 is required to complete and submit your 2021 W4 Form, and you simply need to sign and date the Form.
It’s important to realize that you must complete the Form honestly and accurately since this Form is a legal tax document, and you can face penalties of perjury if you do not complete it honestly.
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How to file a W-4 form in 5 Steps
Step 1: Enter your personal information
The first step is filling out your name, address and Social Security number. Make sure your name is as it appears on your Social Security card. The IRS states that if the name you enter on the form is different from the information found on your Social Security card, you will need to contact the Social Security Administration to ensure you receive credit for your earnings.
Step 2: Multiple jobs or spouse works
The second step applies only if you have more than one job at the same time or are married filing jointly and you and your spouse both work. If one of these scenarios applies to you, then you have three options:
- Use the IRS’s Tax Withholding Estimator tool which most accurately calculates the additional tax you need to have withheld. Apply these withholdings in step 4C of your W-4.
- Use the IRS’s Multiple Jobs Worksheet, located on page 3 of the W-4 if you and/or your spouse work either two or three jobs at the same time. After filling out the worksheet, enter this amount into 4C on your W-4.
- If you and/or your spouse work a total of only two jobs, you can simply check the box located at 2C of the form (you must also check the box on the W-4 form of your other job as well). By checking the box, your standard deduction and tax brackets will be cut in half for each job to calculate withholding. According to the IRS, this option is somewhat accurate for jobs with similar pay; otherwise, more tax than necessary may be withheld, and this extra amount will be larger the greater the difference in pay is between the two jobs.
Step 3: Claim dependents
If you have dependents, the IRS has a tool that can help you determine who you can claim as a dependent. You can only claim dependents if your income is under $200,000 or under $400,000 if you are married filing jointly.
If you have children under 17 years of age, multiply the number of children you have by 5000,000. If, for example, you have three children under 17, enter $6,000 in the first blank. If you have other qualified dependents, you can multiply the number of them by $500. Enter this amount in the second blank of the third section.
Step 4: Factor in additional income and deductions
Step 5: Sign and file with your employer
Some taxpayers might also qualify for exempt status. If, for example, you had no tax liability for the previous year, or for this year, you can claim exempt status on your W-4. Doing so indicates to your employer to refrain from withholding any of your pay for federal taxes. If you choose this option, you will have to fill out a W-4 form each year by Feb. 15 (or by the first business day after if the 15th falls on a weekend) to maintain your exempt status.
What should you put on your W-4?
The information you should put on your W-4 depends on how much you would like taken out of your every paycheck and put toward taxes. If you would like to avoid owing taxes at the end of the and potentially racking up a large tax bill, you should use the IRS’ Tax Withholding Estimator tool to determine how much you should have withheld from each paycheck. Make sure to complete the Multiple Jobs Worksheet if applicable. Consider submitting extra withholdings in line 4(c) or decreasing your number of dependents to ensure you are not greeted with a tax bill at the end of the year. Increasing your withholding will make it more likely that you end up with a refund come tax time.
If you got a large refund last year, or are in a situation where you would rather receive all of your money now and pay your taxes at the end of the year, then consider using the W-4 form to reduce your tax burden. You can reduce the amount of taxes taken out of your paycheck by increasing your dependents, reducing the amount of “non-job” income or untaxed income that you are accounting for in your withholding in lines 4(a) or 4(c), or increasing the figure for itemized deductions in line 4(b).
Do you claim 0 or 1 on your W-4?
In previous years, W-4 forms included an option to have taxes automatically taken out of your paycheck or not. This was done by either not claiming an allowance and allowing the full amount of estimated taxes to be taken out of each paycheck by placing a 0 in the appropriate line, or by placing a 1 in the line and then choosing how much you would like withheld from each paycheck.
As of 2021, this section of the W-4 is no longer relevant. The form has changed to use a more comprehensive formula for determining tax withholdings. A W-4 with the 0 or 1 question indicates that your employer is using an outdated W-4 form. However, you can still fill out this form if requested. A 0 will result in more taxes being withheld from each paycheck, while 1 will allow you to take home more money if you choose — though it may result in a tax bill at the end of the year if you withhold too much.
What do you put on W-4 if no taxes are taken out?
In order to qualify for exempt status, you will need to have no tax liability from the previous year and expect to have no tax liability for the current year. If you meet these qualifications, you can inform your employer not to withhold federal income tax from your paycheck by writing “EXEMPT” in line 4(c).
Your employer will still withhold Social Security and Medicare taxes regardless of your exempt status. Also, your exemption will only last for one year. You will have to file a new W-4 claiming exempt status by Feb. 15 of a given year in order to maintain that status.
How do you have more taxes taken out of your paycheck?
In order to have more taxes taken out of your paycheck, indicate on the W-4 that you would like to have your employer withhold more money or update the form with new information that will result in more money being withheld. This can be done by indicating that you have fewer dependents than you did on a previous W-4 filing. You can also submit more withholdings in line 4(c), which will indicate to your employer that you would like them to withhold more than they currently are.
How do you have less tax taken out of your paycheck?
You can use the W-4 form to reduce your tax burden, as well. To do this, decrease the figure that affects your withholdings. That includes additional withholdings indicated in line 4(c), as well as non-job related income identified in form 4(a). You can also submit a new W-4 if you have a new dependent, which will reduce your withholdings.