In a NutshellThe IRS expects you to pay your federal income taxes throughout the year. A W-4 helps your employer understand how much money to withhold from your paycheck to pay your federal taxes. How you fill out a W-4 affects whether you’ll have to pay more tax (and how much more) when you file your tax return, or whether you’ll get a refund and how much it might be.
This article was fact-checked by our editors and Christina Taylor, MBA, senior manager of tax operations for Credit Karma. It has been updated for the 2020 tax year.
If you work for someone other than yourself, chances are good you’ve filled out a W-4 with your new-hire paperwork.
A W-4 tells your employer how much money to withhold from your paycheck to put toward your federal income tax liability. If you withhold too little, you could end up owing taxes (and possibly a penalty) when you file your federal income tax return. If you withhold more than you need to, you could end up with a refund (which might not sound too bad).
Do you prefer to have more take-home pay throughout the year? Would you rather get a refund? Or do you want to pay exactly the right amount of tax? Whatever your financial objective, you’ll need to understand how to fill out a W-4 to help you achieve it.
- What is a W-4?
- How do I fill out a W-4?
- When should I fill out a W-4?
- Where can I go for help?
- What about my state income tax withholding?
A Form W-4, Employee’s Withholding Certificate (formerly known as Employee’s Withholding Allowance Certificate) is an IRS form that tells your employer how much federal income tax to withhold from your paycheck. You complete the form and provide it to your employer, who may have to share it with the IRS.
The amount your employer withholds will also depend on how much you earn each pay period and how you’re paid (weekly, twice-monthly, etc.), as well as the information you put on your W-4.
What information is on a W-4?
If you fill out a W-4 after Jan. 1, 2020, you’ll be working with a revised form that eliminates the concept of withholding allowances, which confused many people. Now, you won’t have to try to decide how many allowances to take or whether to choose zero allowances — the revised form aims to be more straightforward.
The new Form W-4 includes …
- Your basic personal information, such as your name, address, Social Security number and filing status — single, married filing separately, married filing jointly, qualifying widower or head of household.
- A worksheet for people with income from multiple jobs. This would apply if you hold more than one job yourself or you’re filing jointly with a spouse who also has a job, for example.
- Information to help determine whether you have dependents and meet income requirements for claiming the child tax credit and credit for other dependents.
- Other income, deductions and extra withholding amounts that may affect the amount you have withheld from your paycheck.
The new W-4 is separated into five steps.
Step 1: Enter your personal information
In this section you’ll enter your name, address, filing status and Social Security number.
Be sure the name you provide matches the one on your Social Security card. If it doesn’t, you might not get credit for your withholdings. If you need to update your name on your Social Security file, you can call the Social Security Administration at 1-800-772-1213 or go to ssa.gov.
If you’re not required to have federal income tax withheld from your paycheck, you can skip ahead to Step 5 (where you sign the W-4 form). You may be exempt from withholding if you didn’t owe any federal tax in the previous tax year and don’t expect to owe any for the current tax year.
Step 2: Complete if you have multiple jobs or two earners in your household
You have to do this section only if it applies to you. If you work a second job or file jointly with a spouse who also works, you’ll need to complete this step. You can do this by either using the IRS Tax Withholding Estimator (you’re required to use this option if you or your spouse have self-employment income) or by using the Multiple Jobs Worksheet included with the W-4 instructions.
If you’re dealing with two jobs that have similar pay, you can simply check the box on Line C of this section.
Step 3: Claim Dependents
If you filled out Step 2, you’ll complete Step 3 for only one of the jobs from Step 2. The IRS recommends you work with the highest-paying job to get the most accurate withholding.
Step 3 should help you determine if you qualify for the child tax credit and the credit for other dependents, and if so, how much you might qualify for. If you qualify for the credit, it can directly reduce the amount of tax you owe, and you may be able to withhold less tax from your paycheck.
Step 4: Other Adjustments
This section is optional and includes just three lines to fill in. If you have non-wage income that won’t be subject to withholding, like interest, dividends or retirement income, you can include it here to incorporate into your withholding adjustments.
If you think you’ll itemize your deductions instead of taking the standard deduction amount for your filing status, you can complete the worksheet on Page 3 of the form and record the result in this section.
And this is where you can tell your employer to withhold an additional amount of tax from your paycheck each pay period. You might do this if you want to increase your refund or reduce any amount of tax you may owe when it’s time to file.
Step 5: Sign your form
You’ll sign the form here to inform the IRS that you’ve completed your W-4 as thoroughly, accurately and honestly as you know how. This is also where your employer will fill in its name, address, employer identification number, and your start date.
What are the standard deduction amounts by filing status?
These are the standard deduction amounts for 2020 taxes (which you’ll file in 2021).
$12,400 for single filers and those married filing separately
$18,650 for head of household filers
$24,800 for those married filing jointly or qualifying widower
When you start a new job, your employer is required to have you complete a W-4. Your employer must keep your W-4 on file for at least four years. The IRS also recommends you consider completing a new W-4 if …
- You’ve gone through a major life change, like getting married or having a child.
- You had too much or too little tax withheld in the previous tax year and you want to get closer to your actual tax obligation for the current tax year.
- If you had a major financial change (for example, a significant raise or bonus at work).
You can complete a new W-4 at any time you experience one of these changes during the year since taxes are withheld throughout the year. But check with your company’s payroll department on how to do this so you follow any policies it has for updating a W-4.
One piece of good news: If you’ve already submitted a W-4 to your employer, haven’t changed jobs, or had a life change that would require you to submit a new W-4, and you’re happy with your tax withholdings each year, you don’t have to fill out a new W-4 just because the form has changed in 2020. You can if you want to, but it’s not required.
If you want help figuring out your withholding amount, the IRS offers an online Tax Withholding Estimator. The withholding calculator can also give you an idea of whether you’ll owe or get a refund based on the amount you’re currently having withheld and the amount of tax you owe for the year.
The IRS says the tool should work for most taxpayers, but if your tax situation is more complex, you might want to check out Publication 505, Tax Withholding and Estimated Tax.
The W-4 is designed for your federal income tax withholding. If your state has a state-level income tax (not all do), it may have its own form you’ll have to fill out in order to have state tax withheld from your paycheck.
For example, in New York state, employees fill out Form IT-2104 to inform employers of their withholding amounts. In Alabama, employers can’t base withholdings on the W-4. Instead, they must have employees complete Form A-4, the state exemption certificate.
Some states use the federal W-4. For example, Colorado and South Carolina both use the federal W-4, though South Carolina says it may create its own form because of changes to the federal one.
If you’re not sure what form to use, or if you need one at all, check with your company’s human resources or your state’s department of revenue or other tax administration agency.Learn where to file state taxes for free
Knowing how to fill out a W-4 can help you better manage your taxes throughout the year. The information on your W-4 will help determine how much you might owe, if you’ll get a refund and how big your refund could be. The IRS recommends using its Tax Withholding Estimator to do a “paycheck checkup.”
If you want to change your withholdings, you can update your W-4 at any time you experience a qualifying change. To make changes on your W-4, contact your employer. There may be an online portal you can use for W-4 changes, or you may have to submit a new paper form.
Relevant sources: IRS: Tax Withholding for Individuals | IRS: About Form W-2, Wage and Tax Statement | IRS: Topic No. 306 Penalty for Underpayment of Estimated Tax | IRS: IRS Withholding Tables Frequently Asked Questions
Christina Taylor is senior manager of tax operations for Credit Karma. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.